Era of low interest rates stores up future woes

SINCE 2007, the financial crisis has pushed the world into an era of low, if not near-zero, interest rates and quantitative easing as most developed countries seek to reduce debt pressure and perpetuate fragile payment cycles.

But, despite talk of easy money as the “new normal,” there is a strong risk that real (inflation-adjusted) interest rates will rise in the next decade.

Total capital assets of central banks worldwide amount to $18trn (€13.7trn), or 19% of global GDP — twice the level of 10 years ago. This gives them plenty of ammunition to guide market interest rates lower as they combat the weakest recovery since the Great Depression.