Returning to the “Old Normal” of Low Interest Rates

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December 15, 2015

Even with the Federal Reserve expected to raise interest rates this week, they are expected to stay low for the foreseeable future. After all, other than the stretch between 1970 and 2007, rates have typically been lower than four percent, as the New York Times reports.

Historically, interest rates are tied to inflation, and current Treasury bond prices indicated that the annual inflation in the United States will be only 1.7 percent a year over the next three decades. That means that the current economy is more comparable to the climate of the late 1800s, with low inflation and mild deflation, rather than the 1950s.

“We’re returning to normal, and it’s just taken time for people to realize that,” said Bryan Taylor, chief economist of Global Financial Data, to the New York Times. “I think interest rates are going to stay low for several decades.”

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