Why interest rates are a big deal?

Jeremy Powell, Chair of the Federal Reserve (aka the Fed), the central bank of the United States, will be giving his interest rate decision in a few hours. It will be one of the most watched commentaries with financial market participants trying to assess whether this is the beginning of the end of interest rate hikes and eventual reduction in rates. 

Recently the Fed raised its benchmark interest rate by 0.75%, the second hike of this magnitude in just two months. This move is part of the Fed’s strategy to combat inflation, which has reached record levels in the past year.

But what are the consequences of higher interest rates for the US economy and beyond? 

In this blog post, we will explore some of the effects that interest rate changes have on various sectors and actors, such as consumers, businesses, government, and developing countries.

Consumers: Higher interest rates mean higher borrowing costs for consumers who want to buy a home, a car, or use credit cards. This can reduce their spending power and demand for goods and services. Higher interest rates also affect savings accounts, as they offer higher returns for savers who want to earn more on their deposits.

Businesses: Higher interest rates make it more expensive for businesses to borrow money to invest in new projects, expand production, or hire more workers. This can slow down economic growth and innovation. Higher interest rates also affect corporate profits, as they increase the cost of servicing existing debt and reduce future cash flows.

Government: Higher interest rates increase the cost of financing public debt, which is already at a high level in the US. According to one estimate, the total budget deficit from 2022 to 2031 will be $12.7 trillion . Higher interest rates also affect fiscal policy, as they limit the government’s ability to stimulate the economy through spending or tax cuts.

Developing countries: Higher interest rates in the US can have spillover effects on developing economies in several ways . First, they can reduce US demand for imports from these countries, which can hurt their export-led growth. Second, they can attract capital flows away from these countries, as investors seek higher returns in safer US assets. This can cause currency depreciation and financial instability in emerging markets. Third, they can increase borrowing costs for these countries that rely on external financing from international institutions or markets.

In conclusion, interest rate hikes in the US have significant impacts on various aspects of the economy both domestically and internationally. While higher interest rates are intended to curb inflation and maintain price stability, they also entail trade-offs and challenges for different sectors and actors.

Millennial and Gen Z Survey 2021

We’ve had plenty of research and surveys of Millennials and now more understanding of Gen Z’s can help us understand the changing socio-economic environment. According to a Deloitte survey of over 8,000 Gen Zs, they seem to be the most vocal generation, likely to speak out against things like racism or sexism.

Also like investors and founders of an earlier era of the 1970’s, Gen Zs are willing to upset the status quo. They’re likely to change jobs frequently and don’t expect them to put away their phones while at work.

Click here to download the full report here. (PDF)

Consumer Spending on the Rebound

Consumer spending as a whole is set to rebound strongly post Covid19. However, the recovery is likely to be uneven with high-income households with members who could work remotely being in a better position to spend.

Low-income households will likely not return to 2019 spending levels by 2024, especially US families that have lost jobs and face income uncertainty.

Full article:

Source: HBR

Once in a Millennium

Today is February 2nd, 2020, or 02-02-2020 is a rare palindrome that occurs once in a millennium. The word palindrome comes from the Greek words “Palin,” which means “again, back” and “dromos,” meaning “running,” according to So palindrome is a word or phrase that runs back on itself.

I don’t watch much news other than Bloomberg and didn’t realize the significance of today’s date until my mother (of course) shared it on WhatsApp. I don’t spend much time on social media either other than to share the occasional post/share to stay engaged with my clients and partners. So when I did a quick Google, I noticed how people were using the ‘auspicious’ day as an opportunity to get married and do whatever they were holding off from doing. So the Super Bowl tonight is a little more special than usual.

But this palindrome made me reflect on what it would’ve been like on 01-01-1010, it was the year and beginning of the Julian Calendar which fixed the year-end as December 31st. It was also the year in which the Nile River in Egypt froze over and the first time apparently a Viking explorer attempted to settle in North America.

More importantly, what will the planet and our world look like on March 3rd, 3030 or 03-03-3030? Can you imagine!?

Will the earth survive the ecological damage our industrial world has subjected the earth to over the past centuries? Will we be able to stabilize or reverse climate change? Or will the earth become a wasteland like the many apocalyptic movies portray and we’ll be living on Mars?

The year 03-03-3030

You can let your imagination go wild by trying to imagine what the world would look like 900 years from now. We won’t be around, and neither will our children, grandchildren, or grand grandchildren for that matter.

What’s certain is that we can’t keep polluting and plundering the earth as we have and any hope of making the planet a better place in a100 years, let alone a millennium from now is for us all to make small changes starting now. Just putting your plastic bottle in a recycling bin isn’t enough. We must make responsible conscious choices about how we live, travel, invest and do business.


UK Economy Has Continued To Grow

The UK economy has continued to grow over 2017 whilst employment rates have remained high and unemployment is at its lowest rate since the 1970s. In 2017, the ONS estimated the economy expanded by about 1.8% compared with the previous year, higher than the OBR’s Autumn forecast of 1.5%, but down from a rate of 1.9% in 2016, and the slowest pace of annual growth since 2012. The slowdown in UK GDP growth contrasts with a pick-up in other advanced economies. In the euro area, US, Canada and Japan, quarterly growth has been stronger than in the second half of 2016 and stronger than in the UK. Sterling’s fall has seen inaction pick up more rapidly in the UK than in the other major economies, contributing to weaker real growth.

The fall in the pound that followed the EU referendum has pushed up consumer price ination and squeezed households’ real incomes and spending whilst public spending cuts and political and Brexit-related uncertainties have also weighed on the economy. The OBR has now downgraded its growth forecasts for the medium-term, saying the UK economy would grow by just 1.4% in 2018, 1.3% in 2019 and 2020, and 1.5% in 2021. The growth urge is now in line with the Bank of England’s assessment.

Click here to download the full report.