An entire generation of people is experiencing higher interest rates for the first time in their adult lives.
Interest rates have been at historic lows since the global financial crisis in 2008 — but they’re beginning to creep up.
As the pandemic devastated markets and slowed economic growth, many central banks made aggressive interest rate cuts. That lowered the cost of taking loans, which in turn spurred consumer spending and encouraged big credit purchases.
But now, with demand recovering and supply chains affected by the pandemic and the Ukraine war, inflation has gone up.
“There is no other way to end this inflation, given the supply chain disruption in the background, besides demand destruction,” Lee Boon Keng, director of the Centre for Applied Financial Education at Singapore’s Nanyang Technological University, told CNBC in an interview.
“And demand destruction can only be achieved by very, very tight monetary policy. That includes high interest rates.”