In an opinion piece published some time ago in the FT, Andrew Sentance (see here) made the point that the Fed was "falling behind the curve" in raising rates so as to return to a more normal monetary stance. I would take that one step further - the Fed is now still seriously behind the curve in terms of rate normalization, as it should have started raising rates back in 2014 – we should be at around the 3rd rate hike in my opinion.
One interesting thing that I did hear last week was a comment by Jean-Claude Trichet that the US is in the late stage of its business cycle, but that the euro area and Japan are still mid-way through their business cycle. But that implies that there is now not just divergence in terms of central bank monetary policy, but also “de-coupling” of business cycles between the US, Europe and Japan. This is an interesting conjecture, and I am now working on a future blog which explores this idea.
Next blog though will be my annual look at investment ideas for 2016!
Happy Christmas to all my blog readers!