Goldman Sachs The Markets
Normalizing inflation: are ‘hard yards’ ahead?
Sep 8, 2023
Ashok Varadhan, Co-head of Global Banking & Markets at Goldman Sachs, delves into US inflation and interest rates, the challenges faced by lower quality issuers due to rising rates, the expansion of private credit and its impact on the US economy, and the progress of inflation in the fourth quarter.
09:51
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Quick takeaways
- US inflation has dropped from 8% to 3% in the past two years and the market expects interest rates to be lowered to around 3.5% in the long term.
- Rising interest rates may pose challenges for lower quality credit-conscious borrowers, while higher quality companies have already refinanced their liabilities at lower yields.
Deep dives
Interest Rates and Inflation
The podcast discusses the normalization of interest rates and the goal of reducing inflation to 2%. Over the past two years, there have been significant rate hikes, resulting in inflation dropping from 8% to around 3%. The market believes that this reduction in inflation is more cyclical than structural, and expects interest rates to eventually be lowered to a long-term rate of around 3.5%.
