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Interest rates unlikely to return to pre-crisis levels – Moody’s

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  • 11/05/2016
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Interest rates unlikely to return to pre-crisis levels – Moody’s
Central bank rates are unlikely to return to levels witnessed in the 10 to 20 years before the global financial crisis, a Moody’s Investors Service report suggests.

Moody’s said “lasting scars” caused by the 2008/09 financial crisis such as high unemployment and debt levels, combined with fundamental changes in the global economy meant interest rates will rise only very gradually over the coming years.

The report pointed out that this is a contrast to previous monetary cycles, where rates have tended to rise rapidly after plummeting significantly.

“When monetary policy eventually tightens, policy rates may not return to the average levels seen before the financial crisis,” said Colin Ellis, Moody’s managing director, chief credit officer EMEA, and co-author of the report.

“Over the past seven years, policy rates have been at low levels in most economies and central banks have dramatically expanded balance sheets. Despite this, there has been little sign of a genuine and pervasive increase in inflation.”

Despite an anticipated rate rise over past months, recent reports suggest that the Bank of England has been looking to ensure lenders are prepared for the likelihood of an interest rate cut in the event of an ‘out’ vote in the European Referendum on 23 June.

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