US borrowing costs continue decades-long descent

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Most recently, the natural rate for 10-year US government bonds has dropped to below 2%. This is a stark contrast to the rates observed in 1980 when they were above 5%. The changes in the natural rate reflect the alterations in US borrowing costs, which have been consistently descending for decades.

The natural rate of interest is an essential element of global economics. It is set by the Federal Reserve and represents an optimal point that helps maintain balance between savings and investment. The downward trend of US borrowing costs, as reflected in the falling natural rate for 10-year government bonds, indicates a shift in this balance over time.

This ongoing trend showcases the dynamic nature of economic policies and their impacts on borrowing costs. The Federal Reserve’s strategy in setting the price of money, based on this balance, plays a crucial role in shaping these trends and their subsequent impacts on the economy.

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