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US real interest rates are likely to return to trend

Wednesday, January 4, 2023


Real interest rates -- which matter more for economic activity -- remain negative. Real rates have been declining for centuries. While they are currently negative, this could amount to a short-term deviation from trend.


  • Savers seeking income from higher interest rates will be disappointed as there is no evidence for permanently higher future rates.
  • Contradicting the long-term fall in rates, returns to capital invested by firms have risen and there is little sign of this changing.
  • US exporters are suffering the effects of higher rates strengthening the dollar, making their products more expensive to foreign buyers.

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