17th Geneva Report Launch - 5 November 2015

“Low for Long? Causes and Consequences of Persistently Low Interest Rates”

Marking the launch of the Seventeenth Geneva Report on the World Economy

Charlie Bean (LSE and CEPR), Christian Broda (Duquesne Capital Management, New York), Takatoshi Ito (University of Tokyo, University of Columbia and CEPR) and Randall Kroszner (Booth School of Business, University of Chicago and NBER)

Presented by
Sir Charlie Bean (LSE and CEPR)
Charles Wyplosz (The Graduate Institute, ICMB and CEPR)

Vittorio Grilli (J.P. Morgan)

J.P. Morgan
Thursday 5 November 2015


The 17th Geneva Report examines the causes of the unusually low interest rates seen in recent years, asks whether they are likely to persist, and explores the possible consequences should that happen. The Report argues that demographic developments and Chinese financial integration have been important drivers of low rates, reinforced since the crisis by a reluctance to invest and a shift in investor preferences towards safe assets. But some of these forces are likely to reverse in the future, suggesting that the current period of unusually low interest rates is unlikely to persist indefinitely. The pace at which that reversal will happen remains highly uncertain, however, and dependant on longer-term policy choices.

The return to historically more normal levels of interest rates may consequently be quite drawn out and policy makers need to be alert to the consequences. Aside from increasing the frequency with which monetary policies are constrained by the lower bound on policy rates, persistently low interest rates on safe assets also encourage the adoption of strategies to lever up returns, so heightening the risks to financial stability. While macroprudential policies represent the first line of defence against such risks, policy makers should be careful not to expect too much from them.

How long can low interest rates last?
Sir Charles Bean interviewed by Bob Denham, 23 October 2015
Interest rates have been historically low for decades - long before the financial crisis. What are the causes? And what are the consequences? In this Vox Talk Charlie Bean discusses the findings of the 17th Geneva Report. He argues that the main cause of low interest rates globally is higher savings by the middle aged and that this cause will subside as the middle aged start to retire. But that will take decades and in the meantime there are challenges and risks for monetary policy.

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