Guggenheim’s Minerd Sees Ultra-Low Rates for Rest of Decade

  • Says consensus growing for fiscal stimulus to boost economies
  • Minerd oversees $250 billion for Guggenheim Partners

Scott Minerd, who manages $250 billion for Guggenheim Partners, says investors should prepare for several more years of ultra-low interest rates amid a growing debate over whether the economic regime has changed.

Minerd said recent comments by Federal Reserve President James Bullard of St. Louis and San Francisco Fed President John Williams suggest central bankers are increasingly open to the idea that the neutral rate of interest is much lower than assumed. Williams suggested a “new orthodoxy” for monetary and economic policy, which would include negative rates, higher inflation or growth targets, and spending on infrastructure, education and research, according to Minerd, Guggenheim’s chief investment officer.

“Investors need to accept that low short- and long-term rates will likely be with us through the rest of this decade and possibly beyond,” he wrote in a note Wednesday. “We live at a time where the unthinkable has become common.”

Minerd is joining a growing chorus on investors who are urging governments to step up spending as central banks run out of tools to stimulate growth and savers suffer from low or negative interest rates. Federal Reserve Chair Janet Yellen is expected to offer clues to her views on a possible rate increase when she speaks Friday at a meeting of central bankers in Jackson Hole, Wyoming.

“The current monetary policy regime cannot succeed alone and aggressive fiscal policy must be added into the global policy mix,” Minerd wrote. “The chorus of monetary voices demanding fiscal action is growing.”

The neutral, or natural, rate of interest is the rate at which an economy is growing at its trend speed with stable inflation.

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