by Jim Fuell, Head of Global Liquidity, EMEA, J.P. Morgan Asset Management
With markets braced for the normalisation of G7 interest rates, the outlook for global monetary policy is a major concern for all cash investors. The wrong investment strategy in a rising interest rate environment could lead to a loss of yield and potentially expose investors to higher credit risk. That’s why at J.P. Morgan Asset Management we are focusing our latest Liquidity Insights paper on the relationship between cash management and the interest rate cycle.
Our Liquidity Insights programme is designed to share the firm’s intellectual capital through white papers, economic and market bulletins, surveys, conference calls, web discussions, investment forums and other face-to-face meeting opportunities. Our aim is that the Liquidity Insights programme is relevant and practical and designed to deal with matters of current interest to cash investors. Recent titles include:
- Instituting an investment policy
- A practical guide to evaluating counterparty and sovereign risk
- Weighing the risks and rewards for cash investments
Cash management and rising interest rates
Interest rates in many OECD countries are at, or are close to, record lows. However, with inflationary pressures beginning to build, most investors expect the major central banks to begin raising interest rates soon. The European Central Bank has already started to tighten policy, following a 25 basis point increase in April. The Bank of England is expected to follow later in the year as it tackles an inflation rate that is more than double its target. Even the US Federal Reserve has signalled that rates are likely to rise in 2012, if not earlier.