US real interest rates are likely to return to trend

Significance

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.

Impacts

• 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.