Predictions of rising long-term interest rates due to inflation and deficits are countered by historical trends

From Investing.com: 2024-06-14 06:06:00

James Grant, editor of the Interest Rate Observer, predicts a potential multi-decade rise in interest rates due to historical observations. He suggests that persistent inflation, increased military spending, significant fiscal deficits, and public preference for inflation-driving policies will drive rates higher. However, contrary to Grant’s view, historical data shows a different story. Interest rates have cycled in the past due to robust economic growth, inflation, and consumer demand. Rising debt and deficits divert tax dollars from productive investments, negatively impacting economic growth and interest rates. Despite the inflation surge in the 1970s, today’s economic landscape presents a different challenge with a shift from manufacturing to service-based economy. Ultimately, the outlook for interest rates may not align with Grant’s predictions based on historical economic trends.



Read more at Investing.com: Path of Interest Rates Remains Lower in the Long-Term Despite Soaring Deficits