The case for forever high interest rates

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If financial markets are right, interest rates won't just stay high this year, but possibly forever.

Euro, Hong Kong dollar, U.S. dollar, Japanese yen, British pound and Chinese 100-yuan banknotes are seen in a picture illustration shot January 21, 2016. To match Special Report CHINA-INVESTMENT/EUROFX REUTERS/Jason Lee/Illustration/File PhotoMay 13 - If financial markets are right, interest rates won't just stay high this year, but possibly forever.

Yet making the right call on where rates settle is a huge challenge for policymakers and investors -- many economists reckon R-star is lower than before the great financial crisis, but disagree on how to calculate it, its current level and whether it is rising. But productivity gains have slowed and potential growth is seen subdued on both sides of the Atlantic, factors economists reckon dampen investment.

That may continue; 16% of the world population will be over 65 in 2050, from 10% in 2022, the United Nations projects. That will likely be most strongly felt in Europe. "We've got negative shocks that essentially destroy demand. It's not clear that that will raise R-star," he said.

Source: Financial Digest (financialdigest.net)

GRAPHC MTGFX TOPNWS ANLINS BACT BASMTL BISV BISV08 BIZ BNK BNKS BOE BSVC CDM CEN CMPNY COM CORPD CPPR CSENT DBT ECB ECI ECO ENR EU FED FIN FINS FINS08 FRX GEN GVD HYD IGD INFL INT INTAG JOB MCE METL MPLT NEWS1 NGS NRG PLCY PMI POL STX TOPCMB AMERS US EUROP NAMER EMEA CDTY ECON ENERGY EF:MARKETS-MACROMATTERS

 

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