Inflation surge fuels negative real interest rates for leading economies

Financial Times/John Paul Rathbone and Valerie Romei/11-8-2021

line chart showing the deteriorating real yield on the 10-year Treasury
Sources: St. Louis Federal Reserve [FRED], Board of Governors of the Federal Reserve System (US)

“The surge in inflation is leaving the world’s leading economies with their lowest real interest rates in decades, as central banks delay any abrupt tightening of the extra-loose monetary policy used to help weather the coronavirus crisis, arguing that the recent rise in prices is transitory.”

graphic image of a book and reading glasses A Good Weekend ReadUSAGOLD note: The real rate of return (shown in the chart above) took an even deeper dive into the negative after Financial Times posted this article. On Wednesday, the Bureau of Labor Statistics reported a 6.2% inflation rate. The yield on the 10-year Treasury is going in the other direction. It stands at roughly 1.5%. That sharp downturn is not as yet reflected in the accompanying chart.

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