What does the current economy signify for investing and raw material prices?

The economy is quite stable: the market is normalizing, which has its effects on the policy of central banks, interest rates and the prices of raw materials. What can we expect to happen? In a broadcast of the investors panel of BNR Newsradio and an article of IEXprofs, Professor of Financial Markets at Erasmus School of Economics Mary Pieterse-Bloem elaborates on these subjects. 

According to Pieterse-Bloem, the financial market is slowly but steadily stabilizing. ‘Bond purchases by central banks will decline. The consequence is that interest rates will rise in the long term. How much the increase is going to be, will depend on economic growth, inflation and monetary policy. If the interest rates become too high, a market correction might be evoked. With their goals of reaching financial stability, central banks will want to prevent that.’ That the market is stabilizing, also means that the prices of raw materials will probably normalize, Pieterse-Bloem says.

Effects on the Dutch economy and growth projections

The Dutch economy is stable and strong enough to withstand higher interest rates. However, in the European monetary system, lots of economies aren’t as strong. These countries require the European Central Bank to adjust their policy to the weaker member states. Pieterse-Bloem: ‘In our base-scenario, economic growth will flatten. According to our economists [at Rabobank] the economic growth of the United States will decline from 5.3% this year to 3.4% last year. The economic growth of the euro zone declines from 4.9% this year to 3.7% next year. In the meanwhile, central banks are preparing the market for a pathway to a normal situation. However, if accidents occur, they will offer support instantly. Central banks are still very much willing to accommodate a growing economy.’

More information

You can read the full article from IEXprofs, 20 October 2021, here.

The broadcast of the investors panel of BNR Newsradio, 19 October 2021, can be played here.

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