Era of cheap borrowing may be over as world enters 'a new macro regime': Moody's
A new Moody's report suggests that the era of ultra-low interest rates is over, signaling a shift toward a macro regime defined by higher borrowing costs and geopolitical uncertainty. Markets are adjusting to this new reality, which includes sustained investment in AI and infrastructure.
Why it matters
This shift indicates a fundamental change in global economic conditions that will affect investment strategies, government fiscal policy, and long-term inflation expectations.
The era of ultra-low interest rates that followed the 2008 global financial crisis may finally be over, with investors now preparing for a prolonged period of higher borrowing costs, sustained investment in artificial intelligence (AI) and infrastructure, and elevated geopolitical risks.According to a recent report by Moody's Ratings, “A new macro regime is driving differentiated repricing across financial assets", said market pricing across bonds, equities, credit and commodities indicates that the post-2008 era of ultra-low interest rates and subdued inflation has given way to a fundamentally different macroeconomic environment.”According to the report, current market pricing reflects a broader shift in the global economic environment rather than a disconnect from the real economy. "A common refrain is that financial markets are disconnected from the real economy and thus underpricing macro risk. We disagree and see market pricing...
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