Interest rates likely to fall to pre-pandemic levels – IMF

April 11, 2023

The International Monetary Fund has said it expects interest rates in
major economies to fall back to pre-pandemic levels because of low
productivity and ageing populations.

In a blog issued ahead of its latest forecast for the global economy,
the Fund said increases in borrowing costs were likely to be
“temporary” once high inflation is brought under control.

Central banks in the UK, the US, Europe and other economies have been raising interest rates to try to combat soaring inflation.

However, the IMF said that “recent increases in real interest rates are likely to be temporary”.

“When inflation is brought back under control, advanced economies’
central banks are likely to ease monetary policy and bring real interest
rates back towards pre-pandemic levels.”

The IMF did not say, however, exactly when interest rates were set to fall back to lower levels.

Policymakers are to gather later at the IMF World Bank Spring meetings in Washington.

The eurogroup of Finance Ministers will be represented at the meeting by Minister for Public Expenditure, Paschal Donohoe.

The European Central Bank has been raising interest rates since July last when it ended the era of negative rates.

The ECB deposit rate has been increased to 3% while the borrowing rate stands at 3.5%.

ECB chief economist Philip Lane said last week
that the bank’s next decision on interest rates in May would be
“data-dependent” but another rise could be “appropriate” if certain
economic conditions are met.

Philip Lane made his remarks in an interview with the Cyprus News Agency, which was published by the ECB.

Article Source: Interest rates likely to fall to pre-pandemic levels – IMF

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