Interest rates will fall to pre-pandemic levels once inflation is controlled Cryptocurrencies and ICOs

When inflation in advanced economies is brought under control, real interest rates are likely to drop to pre-pandemic levels, according to the latest blog post from the International Monetary Fund (IMF). According to the authors of the blog post, the transition to a “budget-neutral cleaner economy” could result in lower rates in the medium term.

Recent Interest Rate Increases Temporary

Interest rates in advanced economies are likely to fall to pre-pandemic levels once policymakers manage to bring inflation back under control, the latest blog post from the International Monetary Fund (IMF) suggests. The blog post added that “the recent increases in real interest rates are likely to be temporary.”

The return of real interest rates to levels seen before the spread of Covid-19 will also coincide with the easing of the respective countries’ monetary policy regimes. As Bitcoin.com News has reported, central banks in advanced economies have raised benchmark rates in their attempt to rein in inflation. Rising interest rates have raised fears that the global economy may be heading for a recession.

However, in his April 10 blog postthe authors claimed that a transition to a green economy could lead to lower real interest rates globally:

The transition to a cleaner budget-neutral economy would tend to push global natural rates lower in the medium term, as higher energy prices (reflecting a mix of taxes and regulations) would reduce productivity edge of capital. However, underfunding of public investment in green infrastructure and subsidies could offset and even reverse this result.

The authors also suggested that the so-called deglobalization forces could intensify and this could result in “commercial and financial fragmentation”. According to the authors, this result is likely to cause the natural rate to increase in advanced economies and decrease in emerging market economies.

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Terence Zimwara

Terence Zimwara is an award-winning journalist, author and writer in Zimbabwe. He has written extensively about the economic problems of some African countries and how digital currencies can provide an escape route for Africans.