Real Rates: Negative, but Not Extreme

| Multi Asset

At first glance, the negative real rates that we have witnessed this year may seem extreme, However, our chart shows that they are far from that. The current readings are similar to what we experienced post-2008 and post-2011. The fiscal stimulus from that angle has helped make this “crazy” year more normal than expected.

Central banks around the world have stated their intentions to do “whatever it takes” to help their economies recover from the coronavirus pandemic. Part of that will be to maintain interest rates at their ultralow levels. While we are seeing some signs of inflation (our World inflation Nowcaster is rising at a pace not seen for several quarters), we do not see inflation becoming a risk. So while real rates may stay negative for longer than they did post-2008 and post-2011, we do not expect them to become extreme.

 

Real Rates: Negative, but Not Extreme
Source: Unigestion, Bloomberg. Data as at 21 December 2020.


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