Economists at the IMF said that, once inflation was brought back under control, real interest rates were likely to return towards pre-pandemic levels
– but this trend is likely to be temporary, economists at the organisation said in a new analysis.
Low productivity and ageing populations in rich economies such as Britain, France and Germany mean that low inflation and weak growth will soon return, forcing central banks to cut interest rates once more, they predict. The research considered whether the so-called natural rate of interest – which measures where borrowing costs should be set in order to keep unemployment and growth at sustainable levels andThe IMF analysts said: “Our analysis suggests that recent increases in real interest rates are likely to be temporary.
“When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels”.– up from 0.1 per cent in December 2021.
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