《经济学周刊》：未来75年利率将由什么驱动？

Economics WeeklyWhat Will Drive Interest Rates Over theNext 75 Years? William Blair To most of us in the financial markets, the focus of theKansas City Fed’s Annual Jackson Hole Symposium isalways on the discourse led by the current Fed Chair.For the initial symposium, those at the Kansas City Fedwere canny enough to host it in Jackson Hole to enticethe fly-fishing enthusiast Fed Chair Volcker to attend. Insubsequent years, Chairs Greenspan, Bernanke, Yellen,and Powell (and even other central bank governors suchas Mario Draghi) have all used it as a platform for majorpolicy announcements. This year’s symposium was no dif-ferent; it was used by Chair Powell to likely seal the coffinof the Fed’s previous framework shift to the ill-fated “flex-ible average inflation target” (announced at Jackson Holein 2020)—and to signal the Fed’s intention to lower ratesat the upcoming September FOMC meeting. Often less remarked upon in the financial media are theother papers released during the symposium and the dis-cussions around them. Many of these papers are extremelyinteresting and offer a big-picture view of the macro land-scape, with corresponding implications for the economyand financial markets.In thisEconomics Weekly,we runthrough one such paper presented this year that of-fers a look back and a look forward at the real neutralrate of interest (r-star).With the rather edgy title,TheRace Between Asset Supply and Asset Demand, this paperlooks at what drove r-star—the most important interestrate across the domestic economy and abroad—over thelast 75 years and projects what the coming 75 years maybring in light of expectations for demographics, fiscal con-straints, and productivity growth. Thesupplyof assets here is defined as the value of govern-ment debt, physical capital, and the value of corporateprofits and rent. Assetdemandis viewed as how many ofthese assets households and foreigners are willing to hold. Quite simply, if the demand is greater than the availablesupply, interest rates fall (prices rise); and if the supply isgreater than the current demand, then yields have to in-crease to encourage buyers to purchase those assets. Theauthors view the interest rate as being a race betweensupply and demand, with the winner determining thedirection of travel on rates. In the paper, they quantitatively show that the steadydecline in interest rates over the last 75 years—all theway to the zero lower bound—has meant that demand hasbeen definitively winning the race against supply (exhibit2 shows the Holston-Laubach-Williams estimate of r-starfrom the New York Fed). This race resulted in the structur-al decline in interest rates, which has been a tremendoustailwind for financial markets and the global economy. Where Are We and How Did We Get Here? The paper’s authors present r-star as the unobserved realshort-term neutral rate of interest—i.e., the rate abovewhich the current central bank rate will be deemed re-strictive and below which will be stimulative (as estimatedin exhibit 1). This is the equilibrium clearing price for thedemand for assets against the supply of assets. William Blair Driving this increasing demand for assets have been in-come inequality and an aging population. As populationsage, they amass more wealth and, in turn, the demand forassets increases. Asset supply increases have been due toincreased government debt issuance in combination withincreased supply and valuation for private-sector wealth. Yet, like Japan, this may still not increase interest ratesmuch, as demand is likely to continue winning the raceagainst supply. What About the Coming AI-Driven Pro-ductivity Boom? The authors are surprisingly precise in their estimate ofjust how much demand has increased relative to supply.They estimate that demand since 1950 has increased by415% of GDP. Interestingly, the authors chose not to forecast the poten-tial future impact from productivity growth (exhibit 3). This means that at unchanged interest rates, U.S. house-holds and foreigners would have been willing to hold415% more assets relative to GDP. Conversely, theauthors estimate that asset supply has only increased by31%, hence the steady downward trend in interest rates. How Might This Look Over the Next 75Years? The authors admit that many of the forces that will im-pact future demand are unclear, but one trend that willalmost certainly continue is an aging population. They note that even if the fertility rate stabilizes, agrowing share of the population will still continue to beover 65 years old in the coming decades. For context, thefertility rate has fallen from 3 children per woman in the1950s to 1.6 today (2.1 children per woman would beneeded for a stable population). This omission would seem to be significant for tworeasons. The first is because the authors estimate thatthe continued weakness in productivity growth over thepast 75 years has played a significant role in depressinginterest rates. They estimate that prod