What will equilibrium yield curves be in the future?

We examine what equilibrium yield curves will be, beyond cyclical fluctuations , in the cases of the United States and the euro zone . We must start with some structural trends: Growing scarcities (energy, other commodities, transport, labour) and higher energy prices due to the energy transition, leading to higher equilibrium inflation; Significantly higher investment needs (due to the energy transition) and a likely fall in savings due to population ageing. This can be expected to lead at equilibrium to higher nominal interest rates (in response to inflation) and also to higher real long-term interest rates (due to the increase in investment relative to savings) and therefore to a steeper yield curve slope. The equilibrium yield curve in the future could then be, for example: 3.5% for the short-term interest rate and 4.5% for the long-term interest rate in the United States, instead of 1%/2.4% before COVID; 2.5% for the short-term interest rate and 3.5% for the long-term interest rate in the euro zone (Germany), instead of 0.5%/2% before COVID.