I perfectly agree with Bill Dudley that the Fed will have to raise rates and they will go much higher than investors anticipate. /Bloomberg, 5/11/2021/
Investors are indeed focused on the last business cycle, in which the federal funds rate never exceeded 2.5%. This time, however, short-term memories are not good enough to rely on. We had a once-in-a-century pandemic and we are on the right track to make a very quick comeback you have probably never seen before.
This is the beginning of a completely different business cycle.
Besides, changing but still accommodative fiscal and monetary policies will stay with us for a long period of time. This means that new economic and financial shocks can be handled in the future.
Governor Matolcsy, MNB, the Central Bank of Hungary
Re “Markets are in for an interest-rate surprise”