Markets Projecting Low Rates for Longer

By Unknown

Jumat, 22 Juli 2016

Markets Projecting Low Rates for Longer

Global markets may have recovered their aplomb of a torrid start to the year, but their outlook for global growth and inflation is now so dark that they are the paris on the developed world interest rates remaining close to zero to ten years.

Even if the US Federal Reserve has already begun what he expects will be a series of interest rate hikes, the markets seem to have bought into a "secular stagnation" thesis launched by former US secretary Treasury Larry Summers

posits the idea that the world is entering a particularly long period in which the structurally weak wage growth and inflation -. hampered by aging populations and productivity growth slows - means the interest rate adjusted for inflation needed to stimulate economic demand can be well below zero

As there are probably a lower limit for nominal interest rates just below zero -. because it's cheaper to hold cash and the bank's profitability starts to ebb physical - even those zero rates gaining traction on demand

For all the debate about the accuracy of this point of view, it is already playing on the world markets, with long-term market projections of interest rate swaps. showing the developed world interest rates stuck near zero for several years.

Take overnight interest rate swaps. They involve interest rates of the European Central Bank will not get above 0.5 percent for about 13 years and are not even expected to be well above 1 percent for at least 60 years.

via Reuters

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