Recent bond market movements suggest that equilibrium real interest rates may have risen further, perhaps justified by strong AI investment and persistently high government borrowing. But some recent developments will also bear down on r*, including the crackdown on immigration in the US. On balance, we stand by our view that r* will reach about 2% in the US and 1% in the euro-zone in the 2030s.
Note: We’ll be discussing our r* estimates in light of bond market moves, the AI investment surge and other developments in a Drop-In on Tuesday, 30th September at 1000 ET/1500 BST. Register here.
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