MNI BRIEF: Higher Real Rates Likely In Future - Schnabel
MNI (LONDON) - Shifts in the global economic trends after the pandemic such as protectionism, the decline in the convenience yield have pushed r* upwards, leading to a future where higher interest rates are likely to stay, European Central Bank executive board member, Isabel Schnabel said on Tuesday.
“The shocks experienced since the pandemic led to an abrupt end of the secular downward trend in real interest rates. Whether this will be merely an interlude, or the beginning of a new era, is inherently difficult to predict”, she said, pointing to implications for central banks that will need to adjust to this new environment.
“What matters is the direction of travel. And that is unambiguous”, she said, noting that was unlikely to return to the pre pandemic regime were real rates saw negative levels. (see MNI SOURCES: ECB Likely To Tweak Language, Keep "Restrictive" )