Conventional wisdom and financial markets agree: The era of near-zero interest rates will last as far as the eye can see. Yet the prolonged era of low rates may in fact be ending, according to a provocative new book by Charles Goodhart of the London School of Economics and Manoj Pradhan of Talking Heads Macro.
Over the past decade in particular, inflation-adjusted interest rates have remained remarkably low. The 10-year yield on inflation-indexed Treasury notes at constant maturity in the U.S. fell below 1% in 2011 and fluctuated close to zero until the pandemic. The yield in the third quarter of 2020 averaged -0.9%.