Between 3% and 3.25%, the rent of money in the United States is now at its highest since 2008. Further increases are expected at the November and December meetings. The US key interest rate will end at over 4% against a 0-0.25% level on 1 January.
The high inflation (8.3% in August) explains this speedy monetary tightening. An unprecedented since the 1980s. For Fed President Jerome Powell, it is a priority and urgent to contain the price slippage even if it causes a sharp economic slowdown and an increase in unemployment. It is better to have an economy at a standstill but a contained inflation today rather than an economic depression tomorrow with uncontrollable prices.
While reaffirming their willingness to continue the monetary tightening, the prominent American funders have significantly lowered their growth forecasts. In decline during the first two quarters, economic activity will rebound only timidly in the year’s second half. Over all of 2022, US GDP growth will be close to zero. It will remain low in 2023, around 1%, before returning to a level consistent with the economic potential of the United States in 2024.
These weak short-term economic prospects should not distract you from American assets. Given their long-term potential, US equities remain unavoidable. Buy US equities at 5%, 10% or 15%, depending on whether your risk profile is defensive, neutral or dynamic.
The sharp rise in interest rates in the United States supports the dollar’s value. The euro fell to $0.98. At this level, the greenback appears significantly overvalued. But higher US interest rates offset this currency risk.
The US government debt is also a haven that makes a valuable contribution to reducing the overall risk of your portfolio. The bonds in dollars are still to be bought.