The surge in inflation has kept real interest rates in the world’s major economies at their lowest levels in decades, as central banks have postponed any sudden tightening of ultra-loose monetary policies to help weather the coronavirus crisis and considered the recent price increases to be temporary of.

The actual interest rate minus inflation from the central bank’s policy interest rate reflects the actual cost of borrowing and the actual return on savings. The acceleration of inflation in the United States, the Eurozone, and the United Kingdom, coupled with their central bank’s decision to remain patient when raising interest rates, has effectively increased monetary stimulus, even though these countries are close to recovering lost output from the crisis.

Elena Duggar, managing director of rating agency Moody’s, said that real interest rates “will remain at historically low levels in the coming years”.

In the United States, where nominal interest rates are close to zero, real interest rates are about -5.3%. According to the analysis of the Financial Times, the proportion in the UK is -3% and in Germany -4.6%.

Given Multiple studies Shows that the neutral real interest rate-which neither prevents nor encourages borrowers and investors-has fallen from approximately 4% in the 1980s to around zero today in advanced economies.

The last time real interest rates were as negative as they are today was in the 1970s, when rising energy prices pushed up inflation. research shows. The real interest rate is also fall After the 2008 financial crisis.

Ana Boata, head of global economic research at Euler Hermes Group, said that negative interest rates “keep financing conditions easy and should support credit growth because it makes the cost of debt sustainable.”

This may help the government to finance the huge debts they assumed during the pandemic. However, because negative interest rates are stimulating in monetary policy, Boata warned that they could cause already highly valued financial markets to “become extremely unsustainable and raise concerns about financial stability risks”.

The biggest exception is China. Despite the slowdown in growth, real interest rates are already positive. Last week, the Czech Republic and Poland joined Russia, Mexico, Brazil and other countries to raise interest rates. But higher inflation means that real interest rates are still negative. However, as inflation rates are expected to fall next year, real interest rates will turn positive—up to 3.3% in Brazil and up to 3% in Russia—reflecting the risk premium traditionally invested in emerging markets.

In advanced economies, although economists have recently raised their inflation forecasts in the context of supply chain problems and soaring energy prices, the central bank is only slowly canceling the large-scale stimulus measures implemented during the pandemic.

Last week, Federal Reserve Chairman Jay Powell stated that it is too early to raise interest rates.The Federal Reserve, which has begun to scale back its bond purchase program, said the U.S. inflation rate-currently at a 13-year high of 5.4%-is caused by a variety of factors “Expected to be temporary”.

Christine Lagarde, President of the European Central Bank Postpone Although the inflation rate rose to a 13-year high of 4.1% in October, interest rates are expected to rise next year. She said that the European Central Bank has also slowed down its pandemic bond purchase plan and expects inflation to fall next year.

Similarly, last week the Bank of England Back The nominal interest rate immediately rose from a historical low of 0.1%, although it predicted that inflation would reach 5% early next year and then fall back.

However, even if inflation does fall, real interest rates are still expected to be negative. According to the general inflation forecast for 2022, the real interest rate in the United States is expected to remain around -3.3%, in Germany -2.7%, and in the United Kingdom -3.2%.

Even for the central bank Canada with AustraliaIt indicates that they may raise interest rates soon, and inflation of more than 3% plus a close to zero interest rate level means that their real interest rates are also negative.

“The real interest rate will be much lower than most estimates of neutral [rates] In the foreseeable future,” Capital Capital Macros Chief Economist Neil Schilling said.