April 4, 2023

Why are real interest rates so low globally?

Real interest rates have been historically low for a number of years now, and the global economy is struggling to keep up. The two main factors that have caused this are low inflation and a low demand for loanable funds. Low inflation means that the cost of goods and services is not increasing, which in turn keeps the price of borrowing down. Low demand for loanable funds means that banks are not able to lend as much money as they would like, leading to a decrease in interest rates. Furthermore, central banks around the world are setting low interest rates in an effort to stimulate economic growth. Ultimately, this means that it is becoming increasingly difficult for individuals and businesses to access credit and make investments.