Report
The relationship between inflation and real interest rates
When inflation becomes higher than the central bank’s inflation target, real short- and long-term interest rates rise. We analyse this relationship between real interest rates and inflation in the United States and the euro zone. We look at the spontaneous level of inflation in the United States and the euro zone, which allows us to estimate the level of future real interest rates. We see that the real long-term interest rate observed today: Is close (1. 5 % compared with 2.2%) in the United States to the real long-term interest rate calculated on the basis of the inflation outlook; Is much lower (0. 75 % compared with 2.3%) in the euro zone than the real long-term interest rate calculated on the basis of the inflation outlook.
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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.
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