We're probably all wrong about interest rates

By Allison Schrager

09 Feb 2023 · 4 min read

Conventional thinking is that the near-zero rates of the last decade will soon return. But that could well be wrong, with potentially grave economic consequences, argues Bloomberg's Allison Schrager.

Curated by informed

It's frequently argued that once our economy gets past this burst of inflation, interest rates will fall back to their pre-pandemic lows - and perhaps go lower in the future. Central banks, international organizations and pretty much every economic institution seem to be operating under that assumption. But what if it's wrong?

The thinking is that there's a "natural interest rate" that controls where the Fed and the market set rates. It reflects the productivity of the economy and the supply and demand for bonds. The theory among the world's leading financial institutions is that the natural rate has been trending down for the past few decades and a big reason is an aging population.

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