How far will interest rates rise?

The peak rate of interest in the next tightening cycle is likely to be lower than in the past. Indeed, we estimate that the so-called “neutral rate” is now only around 3% in the US and UK and substantially lower in the euro-zone and Japan. Partly for this reason, policy rates will probably remain very low in the coming years in most advanced economies. However, we still expect the fed funds rate to rise further and faster than the markets expect next year.