10-year real rates have exploded from below zero to over 2%. Some are thinking that this level is too high and requires the Fed to lower rates. Relative to the post-GFC period, the current real rates are well above normal; however, we should place this real rate in context to the more normal period prior to the GFC.
Of course, is there ever really a normal period? So, what is a normal real rate of interest? Is it close to zero or is it somewhere over 2% and closer to the long-term real rate of growth. The post-GFC period was dominated by the QE which pushed rates lower, so with QE lowering every month, it is hard to say whether real rates are too high or just returning to normal.
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