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Macroeconomic & Geopolitical

Will Rates Ever Rise Again?

2 September 2021 - 3 min read

As investors digest the latest flow of very messy economic data, the key question they are trying to answer is “what will be a sustainable level of growth and inflation after the effects of the pandemic have subsided?”

One way to analyze the dynamics ahead is to unpack the drivers of the natural real interest rate, what some economists call r* (read as r-star). Much will depend on the success of the current fiscal programs coming from U.S. and European governments. They will have to be extremely effective at boosting productivity and stimulating demand in order to overcome the powerful structural factors.

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