In the past few years, many borrowers with good credit ratings have enjoyed a cost of debt close to zero or even negative when it is adjusted for inflation. In other words, real interest rates, and, thus, the real cost of borrowing, have been about zero. The rate decline has been global—average global 10 year real rate declined from 6 percent in 1983 to almost zero in 2012 (see figure).
Because the recent interest rate declines reflect, to a large extent, weak economic conditions in advanced economies after the global financial crisis, some reversals are likely as these economy return to a more normal state.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, Financial Crisis, growth, International Monetary Fund | Tagged: debt, inflation, interest rates, WEO, World Economic Outlook | Leave a comment »