Woolnough: US tapering to keep rates lower for longer

The tapering of bond purchases in the US will not lead to interest rate rises, and could in fact prolong record low rates, M&G's Richard Woolnough has said.

The manager of the £15bn Optimal Income fund said the Federal Reserve's desire for a steady bear market in bonds could create the "bizarre" situation where interest rates could stay lower for longer. "Strangely you could argue that the successful creation of a steady bear market in bonds extends the period [the Federal Reserve] can keep rates on hold," he said. "Monetary tightening via the long end reduces the need for monetary tightening in the conventional way." "If the Fed has its way in guiding a steady bear market in bonds, then bizarrely short rates could indeed stay lower fo...