Long-term real rates will be low in US – Minneapolis Fed study
Dampened productivity and ageing population will drag down actual cost of borrowing, say authors
Economists forecasting higher long-term real interest rates in the US are wrong, according to new research from the Federal Reserve Bank of Minneapolis.
Slow productivity growth and an ageing population will continue to exert downward pressure on real rates, write Andrea Raffo and Jeff Horwich. Although higher government debt levels could push rates upward, the authors believe the effect may be “comparatively small”.
“The fundamental forces keeping neutral interest rates low in the long run
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