ALBAWABA - The International Monetary Fund (IMF) predicted that interest rates in advanced economies will eventually drop to levels similar to those seen before the COVID-19 pandemic.
Gradually, the IMF added, that the rates will decline in emerging economies as well.
While central banks are currently fighting the soaring inflation with high interest rates, IMF analysts believe that when inflation is back under control, advanced economies will likely ease monetary policy and switch interest rates back to pre-pandemic levels.
Neutral interest rate, which is a key policy tool that does not stimulate or hinder economic activity, is expected to remain low in advanced economies, or decline further in emerging economies.
While some economists argue that the pandemic has raised the neutral rate, others believe that globalization and low borrowing costs have led to historic levels of government debt.
The IMF acknowledged that some factors may have changed, but asserted that current high interest rates are temporary.
