It also means, Williams said, that the assumption more fiscal policy mean banks can go harder on interest rates is “naïve” and “blind”, with any hike leaving rates far lower than markets are used to and Williams predicting a Fed rate rise to 1% in June, far lower than the US average rate of 5%.
Pointing to the US’s 14-year-run of easing between 1937 and 1951, Williams says this is the only guide available as to what could happen, where the government sat on interest rates and bonds even when inflation hit double-digits.
He said: “The point is if this is in any way a guide, and it’s the nearest thing we have, and we’ve done almost eight years of QE, then you could say we are at best only half way through.
“So like them or loath them, low interest rates, lower for longer, is lower for even longer.”
