The Intelligence from The Economist
The Intelligence: higher-for-longer interest rates
Nov 9, 2023
Henry Kerr, Economics editor for The Economist, shares insights on the enduring high interest rates and their impact on the economy. Kerry Richmond Jones, an international economics correspondent, discusses how the ongoing Israeli-Hamas conflict could affect Israel's economic resilience. They dive into surprising U.S. economic growth amidst inflation worries and the implications of rising bond yields on borrowing costs. The conversation also touches on Israel's mobilization of reservists and its potential long-term economic challenges.
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Quick takeaways
- The expectation of higher interest rates, indicated by rising bond yields, has led to increased borrowing costs and will impact the economy depending on the duration of the trend and borrowers' ability to adjust.
- Israel's war with Hamas has created labor supply challenges, with a shortage of workers in key industries, posing difficulties for the economy and war effort, requiring policymakers to address these issues to maintain stability and finance the war.
Deep dives
Impact of Higher Interest Rates on the Economy
The long-term trend of rising bond yields indicates the expectation of higher interest rates, which has led to increased borrowing costs for individuals, businesses, and governments. However, the overall economy has been cushioned by the accumulation of pandemic savings and long-term borrowing at low rates. The impact of higher rates on the economy will depend on factors such as the duration of the trend and the ability of borrowers to adjust to the new reality.
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