Central Banks
IMF Disagrees With Summers Over Where Interest Rates Will Settle
- Fund sees rates reverting toward pre-pandemic levels
- Summers argues they’ll be substantially higher on average
The International Monetary Fund headquarters in Washington, DC.
Photographer: Stefani Reynolds/AFP/Getty ImagesThis article is for subscribers only.
The International Monetary Fund lined up against former US Treasury Secretary Lawrence Summers in the debate over where interest rates will gravitate to once inflation is beaten.
In its latest World Economic Outlook, the IMF argued that rates in the US and other industrial countries will revert toward the ultra-low levels that prevailed prior to the pandemic, driven by aging populations and sluggish productivity growth. It sees the so-called natural or neutral rate – the inflation-adjusted short-term rate that neither pushes the economy ahead nor pulls it back – comfortably below 1% in the US in the coming decades.