Low interest rates are generally interest rates that are lower than historical norms. They tend to increase consumption, increase equity asset valuations and delay business failures.

More About Low Interest Rates

  • There is no defined level at which rates are low - depend on your timeline of analysis and historical rates

Impacts of Low Interest Rates
  • Low interest rates pull consumption forward - they encourage consumers to spend
  • Low interest rates delay business failures - they let companies that otherwise would fail live off of credit
  • Low interest rates increase equity valuations by lowering the discount rate used to value them
  • Low interest rates force investors to take more risk in order to generate the same yield as with higher rates