Are higher interest rates and inflation ahead? A long-term view beyond the pandemic

Inflation and interest rates in industrialised countries (ICs) have trended downward for a good 30 years now. Today they are well below their long-term average. Central banks and their low and negative interest rate policies are an important but by no means the sole driver of this development. Rather, demographic processes, the rise of China and advancing globalisation since the 1990s are likely to have been the main factors that have exerted downward pressure on price and interest levels. This means that even without the monetary policy responses to the crises of the past decade interest and inflation rates today are likely lower than as recently as in the 1990s, for example. Our study discusses the impact chains of these processes in greater detail and explains that longer-term upside risks to inflation and interest rates in ICs are likely to result primarily from the reversal of the former.

Are higher interest rates and inflation ahead? A long-term view beyond the pandemic(PDF, 209 KB, non-accessible)