Investors are always fretting about some risk or other, and lately the big fear has been that interest rates around the world will stay higher for longer.huge sums
If interest rates stay about their current level for a while to come, it will be unpopular with borrowers and could be very tough for people struggling with mortgage debt. But the fact that this scenario is being priced in by markets is not a sign of impending doom for the wider economy. Just because investors have taken a hit from the ‘higher for longer’ story, the prospect of high rates hanging around is not a terrible sign for our economy.
Because in Australia, the underlying reason that rate cuts appear to be off the table for now is the economy is proving surprisingly resilient. If you’d asked economists how the country would cope with rates jumping from 0.1 per cent early last year to 4.1 per cent now, most would have predicted the economy would be in far more trouble than it is.