- We expect monetary policy to become increasingly restrictive in real terms as inflation falls towards central banks’ targets. As economic resilience fades, central banks will be in a position to reduce policy interest rates.
- After policy rates recede from their cyclical peaks, we expect rates to settle at a higher level than we had grown accustomed to before the Covid-19 pandemic. Zero interest rates are gone; a higher-rate environment is here to stay.
- Higher interest rates mean higher returns for long-term bond investors. We see global bonds as close to fair value. Meanwhile, the return premium of global equities over global bonds we expect over the next decade has further reduced.
Vanguard economic and market outlook for 2024: A return to sound money
