Interest rates may stay high for years, changing economic landscape
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Interest rates could stay high for a decade or more, reversing the downward trend of recent decades. This will make borrowing more expensive for households, companies, and governments.
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Higher rates for longer could lead to falling house prices, corporate deleveraging, bank instability, and more fiscal austerity. The economic consequences could be grim.
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But higher rates may signal faster productivity growth, which could offset the costs of debt servicing. Or excessive government borrowing may have soaked up savings, leaving little for the private sector.
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Persistently high inflation could erode the real value of debt over time. Or a recession could prompt central banks to cut rates again.
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Markets think higher rates are here to stay, but some investors are now betting central banks will have to reverse course as growth slows. The future path of rates is highly uncertain.