Mercer Insights

Preparing for Fed Lift-Off


Since the financial crisis, central banks around the world have supplied extraordinary monetary stimulus to the global economy through record low interest rates and quantitative easing (“QE”). The most influential central bank, the US Federal Reserve (“the Fed”), has maintained its target rate at close to zero since December 2008 and increased the size of its balance sheet by around $3.5trn. The Fed seems likely to take its first tentative step towards “normalisation” at some point in the next few months, although the recent turmoil in markets might keep them on hold until 2016.

While speculation rages around the timing of the first hike, we think it is more important to think about the potential implications of normalisation for the economy and markets, regardless of precisely when the first rate rise happens.


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