The era of low interest rates may not be over

FROM a financial point of view, 2022 has, above all, been the year of rising interest rates. True, the United States Federal Reserve didn’t begin raising the short-term interest rates it controls until March, and its counterparts abroad acted even later. But long-term interest rates, which are what matter most for the real economy, have been rising since the beginning of the year in anticipation of central bank moves.

These rising rates correspond, by definition, to a fall in bond prices. But they have also helped drive down the prices of many other assets, from stocks to cryptocurrencies to – according to early indications – housing.

So what will the Fed do next? How high will rates go? Well, there’s a whole industry of financial analysts dedicated to answering those questions, and I don’t think I have anything useful to add. What I want to talk about instead is what is likely to happen to interest rates in the longer run.