The market is sending signals that the Federal Reserve may not make much headway raising interest rates during the next two years—even if central bankers are intent on doing so, Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, said on Tuesday.
The central bank will not be able to raise its federal funds rate above 1.5 percent by the end of 2017, Golub said. If the central bank tries to do so, the dollar will start to rise, putting pressure on the economy and causing the Fed to retreat.
"Are we asking the permission of the Europeans for our central bank policies? I'm not sure, but the market's saying [we are]."
The Fed faces the challenge of raising rates at a time when European central bankers are suppressing rates by purchasing large amounts of bonds. That monetary policy disparity is expected to send investors flocking to U.S. bonds for higher yields, which would drive up the value of the dollar.
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