TechFlow news — On July 4, the Wall Street Journal reported that a paper by two economists from the Federal Reserve Bank of Kansas City has drawn market attention. The article suggests that U.S. interest rates may remain above 5% much longer than investors expect—possibly until 2026.
The economists noted that although the Federal Reserve has tightened policy over the past year at perhaps the fastest pace since the 1980s, rapidly rising inflation has pushed up the equilibrium interest rate in the U.S. economy even more quickly. Given that economic growth remains strong (with the latest estimate showing a 2% annualized GDP growth rate in the first quarter), the Fed may need to keep interest rates no lower than current levels for more than three years to bring the PCE price index—the inflation measure favored by the central bank—back to the Fed's 2% target.
