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Fuss: We're in the Foothills of a Long Rise in Rates

But the upward trend in interest rates may be forestalled as the dollar remains a safe haven for fearful global investors, says the Loomis Sayles Bond manager.

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Jacobson: Well, let me just shift gears for one more question. Especially given what you've described--we've talked about some of the risks globally--what are you thinking at this point about inflation and interest rates here in United States?

Fuss: OK--best guess, and all I can do is guess. But I suspect that we are in the foothills of a long rise in interest rates, followed by, not led by, followed by inflationary pressures, some of which will get ahead of interest rates--unit cost to labor, for example--and that's the strongest one, but it doesn't show up in the CPI. But the foothills are rolling like this. I don't think we'll actually be into an upward trend really out of the foothills until our own central bank backs away from buying Treasuries.

Eric Jacobson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.