Interest Rates Over the Years

In past Market Pulse episodes and in articles over the past year, we’ve talked a lot about the interest rate environment staying higher for longer. This graphic from BofA, which examines interest rates going back 5,000 years, provides outstanding context for just how anomalous the recent low interest period really was. The only other period in history, according to BofA, where interest rates were near zero for an extended time period was the Great Depression.

Many investors (and homebuyers for that matter) are still yearning for and expecting a period of low inflation and interest rates. While the probability of one is not zero (if economies collapse into severe recessions and/or disinflationary trends returns), the probability is that we are facing a secular period of moderately higher and positive real interest rates. Even modest cuts to Fed Fund rates would still not bring us anywhere near the low rate environment we experienced for 15 years after the financial crisis.

The November Market Pulse episode sums up some of the reasoning behind the “higher for longer” hypothesis.