There was a mixed response to Federal Reserve Chair Janet Yellen's comments last week on a time frame for future interest rate increases, with some analysts viewing it as a mistake and others finding it encouraging.
Financial advisor Michael Yoshikami, CEO of Destination Wealth Management, called it "refreshing," arguing on CNBC.com this week that "rising interest rates and inflation are not necessarily a negative."
Consumer prices rose 1.1 percent in the year through February, while the Fed's federal funds rate target stands at zero to 0.25 percent.
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Higher rates are the sign of an improving economy, Yoshikami said. "Rising rates suggest economic growth and that's good for stock prices and the overall economy," he wrote.
Equally important, he maintained, is that investors dependent on the income from their fixed-income investments will benefit.
"Millions of fixed-income investors are earning negative yields on their fixed income. The 10-year Treasury currently earns less than three percent and, when factoring in inflation at current levels, are essentially earning nothing," he said.
"It's a horrible outcome for millions of investors who thought that investing in conservative fixed assets would provide them the income stream they needed to live the rest of their life."
Inflation is also a natural outcome of economic growth, Yoshikami noted. "Companies need pricing power and inflation provides that opportunity," he wrote. "Companies have been relying on cost cuts to increase profits, but can't do so indefinitely."
The concern with rising rates is hyperinflation, said Yoshikami, but that scenario is highly unlikely given the fact that Yellen pledged to continue to keep rates low long after the economy has started to pick up.
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