There are a few bright spots on the horizon. Despite widespread investor concerns about an overheated economy, any increases in inflation and interest rates are likely to be modest. “By historic standards, interest rates are not high compared to inflation,” he says. “The problem is that people got used to abnormally low interest rates.” Inflation, which has averaged around 1.7% over the last few years, could tick up to 2% or 2.25% over the next year or two, while the rate on the 10-year Treasury could get as high as 3.25% later this year.
The new chairman of the Federal Reserve, Jerome Powell, will obviously have a strong influence on where interest rates go. Miller views him as “a talented person with substantial experience” who is likely to follow in the measured and transparent footsteps of his predecessor, Janet Yellen. Nonetheless, “it’s likely that we’ll see three to four interest rate hikes this year, depending on how quickly the economy seems to be expanding.”
