International Economics and Domestic Interest Rates
The world’s economic outlook can at times seem uncertain, but governmental actions and macroeconomic trends present a favorable outlook regarding the expansion of the worldwide consumer class during the 21st century. Administered for decades as manufacture and export economies, most developing nations, such as India, China, and Brazil, welcomed the 21st century without a strong middle class. However, several of these now-mature economies are purposefully advancing the creation of a large urban class with substantial purchasing power. During the 1990s, India was one of the first countries to launch an official middle class expansion campaign as a motor for its own economy. Even though substantial growth has taken place over the last 25 years, India’s middle class today has not attained the size or purchasing power of similar economies. Nevertheless, other nations have undertaken similar policies as their populations become older and increasingly urban. Retired city dwellers exert a natural pressure on governments to increase the size of the middle class given that, as labor force participants and taxpayers, the working middle class will sustain the senior citizenry. For example, the middle class in Brazil and China has advanced significantly over the last decade. Thus, both countries have achieved an average per capita income of over US$15.000 annually for the middle class, which now represents approximately a third of the national wealth in China and Brazil respectively.
International Economics and Domestic Interest Rates
In the United States, the most recent meeting of the Federal Open Market Committee (FOMC) was held during the first days of May. On May 2, the Federal Reserve and its Chair Jerome Powell outlined a positive macroeconomic outlook for the United States with favorable jobs creation numbers and a low unemployment rate. Likewise, the FOMC announced that inflation is increasingly closer to the Federal Reserve’s long-run target of 2.0%. However, they also pointed out that, during the beginning of 2018, household spending and business investment remained steady and did not continue its trend of growth.
Therefore, the FOMC decided to maintain its current target for the Federal Funds rate at a range between 1.5% and 1.75%, which had been set at the FOMC’s previous meeting in March. Moreover, the Federal Reserve’s FOMC is expected to meet again in June. If economic conditions continue to improve, it is expected that the target interest range will be increased again during the coming months, with the Federal Funds target rate hitting 2.1% by the end of 2018, 2.9% by the end of 2019, and 3.1% by the end of 2020. Similarly, the FOMC expects the Real Gross Domestic Product growth (inflation adjusted, GDP) of the United States to reach 2.7% in 2018, 2.4% during 2019, and 2.0% in 2020. In the case of the stock market, the Dow Jones Industrial Average (DJIA) has continued to grow, from 20.660 points on March 22, 2017 to 22.350 points on September 22, 2017 and approximately 24.357 points on May 7, 2018.