Zero-bound remains intact at the Fed

On nominal rates alone, I’m more hawkish than I was, though I still don’t expect them to head much higher than 1% before the Fed changes course, a view more in line with the market that the dot-plot. My view on nominal rates is not because I think the Fed or other central banks will meaningfully unwind monetary accommodation in the coming years (quite the opposite in fact). As discussed previously, Jackson Hole re-affirmed the view that Yellen and her colleagues at the Fed clearly do not want to cross the zero bound, a monetary Rubicon that once crossed is not easy to uncross. Therefore, the next rounds of stimulus, of which I expect there to be many, are more likely to be “limited”, or at least heavily focused on a combination of inflation targeting, asset purchases, and forward guidance.