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A Ticking Clock: Navigating High Real Rates in a Debt-Heavy US Economy

US Core PCE (the Fed's preferred inflation metric) slowed down to 2.3% annually in Q3 of 2023.

In the last 20 years, real interest rates, calculated as the difference between 5-year Treasury

yields and the Core PCE inflation rate, only stayed above current levels in the period from 2005-2007.

How long can the US economy cope with such high real rates given the amount of debt accumulated since then? We believe not for long.


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