Report
A long period of very low interest rates: Is it dangerous? What consequences for investors?
It now seems clear that interest rates are going to remain very low for a long time in the United States, the euro zone and Japan. Central banks are keeping their monetary policies expansionary , given low inflation, high debt and the irreversible nature of these policies. In theory, it is dangerous to keep interest rates forever abnormally low: it is expected to lead to overindebtedness, asset price bubbles, inefficient investments, a fall in the exchange rate, etc. In practice, the case of Japan since the late 1990s shows that the only clearly apparent problem is an increase in the public debt ratio, which reinforces the irreversibility of these policies. For investors, the continuation of very low yields on risk-free bonds will maintain the need to obtain higher returns by increasing the weight of risky and illiquid assets in their portfolios: investor risk appetite will not be able to remain low forever .
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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