The Federal Reserve: Shrinking attractiveness of government bonds leads to increase in "natural interest rate"

Researchers at the New York Federal Reserve in the United States pointed out that since 2019, the global "natural interest rate" has seen a "statistically significant increase", rising by about 1 percentage point in the United States and other developed economies. The decrease in the attractiveness of government bonds in terms of "safety" and "liquidity" is the main reason, contributing to about 50% of the interest rate increase. In addition to the decline in attractiveness of government bonds, the prospect of artificial intelligence-driven productivity growth, as well as the sharp increase in the ratio of government debt to GDP in various countries, are also important factors driving up interest rates. Powell once likened the natural interest rate to the "North Star" for sailors. Research shows that the position of this navigational star is undergoing a significant shift, which will directly affect the interest rate decisions of the Federal Reserve and central banks worldwide.