Lower for longer

 Low Interest Rates Will Return — Again and Again

Forces that have been pushing borrowing costs down for as long as we can remember haven’t vanished. 

Central to the issue is whether estimates of “neutral,” the inflation adjusted short-term rate that neither brakes nor juices the economy, and the closely related “natural” level, a longer-run gauge, have changed appreciably in the past few years. 

By some reckoning, forces that drove rates consistently lower for three decades are still broadly in place. 

 “Real interest rates will not return to their level of three decades ago anytime soon,”  Maurice Obstfeld wrote

In a Bank of England staff paper published in 2020, Paul Schmelzing found that long-term real rates have been inching lower since the Middle Ages. 

Daniel Moss Bloomberg 30 maj 2023

https://www.bloomberg.com/opinion/articles/2023-05-30/interest-rates-they-will-return-to-lower-levels-again-and-again

Staff Working Paper No. 845 Paul Schmelzin

Eight centuries of global real interest rates, 

R-G, and the ‘suprasecular’ decline, 1311–2018

https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018

“the financial stability interest rate” (which they call r**, not to be confused with r*, the neutral interest rate) — the threshold interest rate above which the central bank triggers a problem of financial stability.

Englund: CPI still rising at about 5% (englundmacro.blogspot.com)

Englunds lag 3 (Inflation and the housing market)

Räntan (A) är vad som behövs för att stoppa inflationen.

Räntan (B) är den som gör att bostadsmarknaden kollapsar.

Om A är större än B har vi ett stort problem.

The interest rate (A) is what is needed to stop inflation.

The interest rate (B) is the one that causes the housing market to collapse.

If A is higher than B, we have a big problem.