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Higher rates may boost returns

Higher rates may boost returns

In a bullish address to Congress this week, new Federal Reserve chair Jerome Powell signalled he would seek to raise US interest rates four times in 2018. Following February’s spike in market volatility, this may seem a bold stance. Being upbeat about the US economy, however, is part of the exercise in controlling the narrative around inflation, which Mr Powell expects to hit the Fed’s 2 per cent annual target this year. The line is that strengthening fundamentals are cause for confidence and higher interest rates should be taken as a positive sign that the central bank is not going to allow the economy to overheat.

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