I would like to draw your attention to a key development in the macroeconomic environment that may shape our forward strategies and market expectations.
Despite heightened geopolitical tensions between Israel and Iran, the United States Federal Reserve has chosen not to lower interest rates. Historically, such global conflicts often prompt central banks to ease monetary conditions to buffer economic uncertainty. The Fed’s inaction in this case, however, is telling.
This restraint strongly suggests that U.S. interest rates have likely reached their cyclical floor. Barring a dramatic deterioration in global conditions, it is increasingly probable that the next directional move in rates will be upward.
We must now prepare for a potential transition from a low-rate regime to a rising interest rate environment. This has implications across funding costs, capital allocation, and investment strategy. Teams should begin stress-testing assumptions and revisiting models that have priced in sustained low rates.