Investors can no longer take low interest rates for granted

DURING MOST of the pandemic, exceptional uncertainty about the future of America’s economy has been met with exceptional certainty that monetary policy would stay very loose. No longer. At the Federal Reserve’s meeting in June policymakers signalled that they may raise interest rates in 2023, sooner than they previously thought, and upgraded their inflation forecasts for this year. Investors have spent a week struggling to digest the news. Long-term bond yields, which move inversely to prices, first rose and then fell beneath their initial level. Shares fell steeply and then recovered. Emerging-market currencies, which suffer when American monetary policy tightens, have fallen against the dollar.