Interest rates likely to fall to pre-Covid levels, IMF predicts
Posted: April 11th, 2023, 1:56 pm
Interest rates likely to fall to pre-Covid levels, IMF predicts
Interest rates in major economies are expected to fall to pre-pandemic levels because of low productivity and ageing populations, according to a forecast.
The International Monetary Fund (IMF) said increases in borrowing costs are likely to be "temporary" once high inflation is brought under control.
The Bank of England has been raising interest rates since December 2021, taking them from 0.1% to 4.25%.
This has raised mortgage payments for many homeowners.
Interest Rates Likely to Return Toward Pre-Pandemic Levels When Inflation is Tamed
How close will depend on the persistence of public debt, on how climate policies are financed and on the extent of deglobalization.
...
Real interest rates have rapidly increased recently as monetary policy has tightened in response to higher inflation. Whether this uptick is temporary or partly reflects structural factors is an important question for policymakers.
Since the mid-1980s, real interest rates at all maturities and across most advanced economies have been steadily declining. Such long-run changes in real rates likely reflect a decline in the natural rate, which is the real interest rate that would keep inflation at target and the economy operating at full employment–neither expansionary nor contractionary.
World Economic Outlook, April 2023: Analytical Chapters
Chapter 2: The Natural Rate of Interest: Drivers and Implications for Policy
The natural rate of interest—the real interest rate that neither stimulates nor contracts the economy—is important for both monetary and fiscal policy; it is a reference level to gauge the stance of monetary policy and a key determinant of the sustainability of public debt. Chapter 2 aims to study the evolution of the natural rate of interest across several large advanced and emerging market economies.
AiY(D)
Interest rates in major economies are expected to fall to pre-pandemic levels because of low productivity and ageing populations, according to a forecast.
The International Monetary Fund (IMF) said increases in borrowing costs are likely to be "temporary" once high inflation is brought under control.
The Bank of England has been raising interest rates since December 2021, taking them from 0.1% to 4.25%.
This has raised mortgage payments for many homeowners.
Interest Rates Likely to Return Toward Pre-Pandemic Levels When Inflation is Tamed
How close will depend on the persistence of public debt, on how climate policies are financed and on the extent of deglobalization.
...
Real interest rates have rapidly increased recently as monetary policy has tightened in response to higher inflation. Whether this uptick is temporary or partly reflects structural factors is an important question for policymakers.
Since the mid-1980s, real interest rates at all maturities and across most advanced economies have been steadily declining. Such long-run changes in real rates likely reflect a decline in the natural rate, which is the real interest rate that would keep inflation at target and the economy operating at full employment–neither expansionary nor contractionary.
World Economic Outlook, April 2023: Analytical Chapters
Chapter 2: The Natural Rate of Interest: Drivers and Implications for Policy
The natural rate of interest—the real interest rate that neither stimulates nor contracts the economy—is important for both monetary and fiscal policy; it is a reference level to gauge the stance of monetary policy and a key determinant of the sustainability of public debt. Chapter 2 aims to study the evolution of the natural rate of interest across several large advanced and emerging market economies.
AiY(D)