current
Interest Rate Normalization
After a period of financial repression, interest rates are returning to levels closer to their historical averages.
Timeframe
near-term
Categories
Subcategories
Impact areas
Detailed Analysis
The era of ultra-low interest rates and quantitative easing is ending. While disinflationary forces like digitalization and demographics persist, the resilience of Western economies to higher rates suggests a 'higher-for-longer' scenario. The key question is whether this marks a sustained shift or a temporary normalization before a return to financial repression.
Context Signals
Fed's easing cycle in 2024
Decline in 10-year US Treasury yield
Strong private sector balance sheets in developed economies
Edge
Higher interest rates could create opportunities in fixed income markets.
The impact of rising rates on government debt sustainability needs careful monitoring.
Central banks' ability to manage systemic risks has improved, but vigilance is still required.
