© Reuters. FILE PHOTO: The Federal Reserve building is seen in Washington, U.S., January 26, 2022. REUTERS/Joshua Roberts/File Photo
By Yoruk Bahceli
(Reuters) – Get ready for some disappointing news. Borrowers seeking relief from higher interest rates may not see much change for years to come, according to financial markets. Even if rates fall in 2024, it appears that we’re in for an extended period of elevated rates. Money markets indicate that the historically low near-zero interest rates that followed the great financial crisis are unlikely to return anytime soon, due to high inflationary pressures and government spending.
Unfortunately, this situation poses a risk for many borrowers, both public and private, who locked in lower rates in the past and have yet to feel the full impact of central bank rate hikes over the last couple of years.
While hopes for steep rate cuts next year have boosted bond and equity markets, it seems that the decrease won’t be as significant as anticipated. The U.S. Federal Reserve is expected to lower its key rate to around 3.75% by the end of 2024, with a slight fall to around 3% by the end of 2026, followed by a rise back up to around 3.5% thereafter, according to money market pricing expectations.
