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Markets in a Minute

Visualizing the 200-Year History of U.S. Interest Rates

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History of U.S. Interest Rates

us interest rates

This Markets in a Minute Chart is available as a poster.

Visualizing the 200 Year History of U.S. Interest Rates

U.S. interest rates will stay near zero for at least three years as the Federal Reserve enacts measures to prop up the economy.

But are low interest rates a new phenomenon? Interestingly, one study by the Bank of England shows that this pattern of declining interest rates has taken place globally since the late Middle Ages. In fact, it suggests that these downward-sloping rate trends have taken place even before modern central banks entered the scene—illustrating an entrenched, historical trend.

This Markets in a Minute chart from New York Life Investments tracks the history of U.S. interest rates over two centuries, from the creation of the first U.S. Bank to the current historic lows.

U.S. Interest Rates: Historic Highs and Lows

What are the highest and lowest rates throughout history?

Prior to today’s historically low levels, interest rates fell to 1.7% during World War II as the U.S. government injected billions into the economy to help finance the war. Around the same time, government debt ballooned to over 100% of GDP.

Fast-forward to 1981, when interest rates hit all-time highs of 15.8%. Rampant inflation was the key economic issue in the 1970s and early 1980s, and Federal Reserve Chairman Paul Volcker instigated rate controls to restrain demand. It was a period of low economic growth and rising unemployment, with jobless figures as high as 8%.

YearAverage Interest Rate*Year OpenYear CloseAnnual % Change
20200.9%1.9%0.7%**-65.1%
20192.1%2.7%1.9%-28.6%
20182.9%2.5%2.7%11.8%
20172.3%2.4%2.4%-1.6%
20161.8%2.2%2.4%7.7%
20152.1%2.1%2.3%4.6%
20142.5%3.0%2.2%-28.6%
20132.4%1.9%3.0%70.8%
20121.8%2.0%1.8%-5.8%
20112.8%3.4%1.9%-42.7%
20103.2%3.9%3.3%-14.3%
20093.3%2.5%3.9%71.1%
20083.7%3.9%2.3%-44.3%
20074.6%4.7%4.0%-14.2%
20064.8%4.4%4.7%7.3%
20054.3%4.2%4.4%3.5%
20044.3%4.4%4.2%-0.7%
20034.0%4.1%4.3%11.5%
20024.6%5.2%3.8%-24.5%
20015.0%4.9%5.1%-1.0%
20006.0%6.6%5.1%-20.6%
19995.7%4.7%6.5%38.7%
19985.3%5.7%4.7%-19.1%
19976.4%6.5%5.8%-10.6%
19966.4%5.6%6.4%15.2%
19956.6%7.9%5.6%-28.8%
19947.1%5.9%7.8%34.5%
19935.9%6.6%5.8%-13.0%
19927.0%6.8%6.7%-0.2%
19917.9%8.0%6.7%-17.0%
19908.6%7.9%8.1%1.9%
19898.5%9.2%7.9%-13.2%
19888.9%8.8%9.1%3.5%
19878.4%7.2%8.8%22.1%
19867.7%9.0%7.2%-19.7%
198510.6%11.7%9.0%-22.1%
198412.5%11.9%11.6%-2.3%
198311.1%10.3%11.8%14.1%
198213.0%14.2%10.4%-25.9%
198113.9%12.4%14.0%12.5%
198011.4%10.5%12.4%20.3%
19799.4%9.2%10.3%12.9%
19788.4%7.8%9.2%17.6%
19777.4%6.8%7.8%14.2%
19767.6%7.8%6.8%-12.2%
19758.0%7.4%7.8%4.9%
19747.6%6.9%7.4%7.3%
19736.9%6.4%6.9%7.6%
19726.2%5.9%6.4%8.8%
19716.2%6.5%5.9%-9.4%
19707.4%7.9%6.5%-17.5%
19696.7%6.0%7.9%27.9%
19685.6%5.6%6.2%8.1%
19675.1%4.7%5.7%22.8%
19664.9%4.6%4.6%-0.2%
19654.3%4.2%4.7%10.5%
19644.2%4.1%4.2%1.7%
19634.0%3.8%4.1%7.5%

*Indicated by 10-Year Treasury Yields, a prime mover of interest rates
**As of September 28, 2020
Source: Macrotrends

Over the last year, interest rates have dropped from 2.1% to 0.9%, a 65% decrease. Rates are now below 1945 levels—and well under 6.1%, the average U.S. interest rate over the last 58 years.

Longer Horizons

Interest rates in the 18th and 19th centuries also provide illuminating trends.

After falling for three decades at the turn of the century, interest rates stood at 4% in 1835. That year, president Andrew Jackson paid off the U.S. national debt for the first and only time in history, as debt was seen as a “moral failing” or “black magic” in his eyes.

One consequence of this was the government sold swaths of land to finance the federal budget, ultimately avoiding the accumulation of debt. It didn’t last for long. The influx of land sales led to a real estate bubble and eventually, the economy fell into a recession. The government had to borrow again and rates ticked higher over the next several years.

Similarly, after the Civil War ended in 1865, data shows that interest rates also witnessed a long-term, negative slope, which ended in 1945. It then took 100 years for interest rates to exceed the highs of the Civil War era.

Why So Low For So Long?

While the exact reasons are unclear, broad structural forces may be influencing interest rates.

One explanation suggests that higher capital accumulation could be a factor. Another suggests that modern welfare states, with their increased public spending, have as well. For instance, average expenditures of total GDP in the UK averaged 35% between 1981 and 1960, compared to 8% between 1700 and 1750.

Along with this, rates usually have cycles that last between 22 and 27 years. When cycles shift from rising to falling rates, a quick reversal typically takes place. This was seen in 1982, when interest rates dropped 25%—from 14.2% to 10.4%—in one year. However, a different trend can be seen when falling rates switch to rising trends. These reversals typically average 2-14 years.

As near-zero rates seem more likely for the extended future, market distortions—such as ultra-low income yields—may become more commonplace. In turn, investors may want to rethink traditional asset allocations between fixed income, equities, and alternatives.

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Markets in a Minute

Visualizing Interest Rates by Country in 2021

Are short-term interest rates rising or falling around the world? In this infographic we show interest rates by country in 2021.

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Interest Rates by Country

Visualizing Interest Rates by Country in 2021

Going as far back as the 14th century, pandemics have been found to have a negative effect on interest rates.

History shows that this effect is even greater than that of financial crises. Across a study of 19 pandemics since the mid-1300s, real interest rates fell an average of 1.5 percentage points lower in the following two decades than they would have otherwise. And yet, even before COVID-19, structural forces, such as rising debt, were causing interest rates to fall.

The above Markets in a Minute chart from New York Life Investments shows interest rates by country in 2021.

How Have Interest Rates Changed?

Broadly speaking, the majority of countries’ short-term interest rates have declined since COVID-19 began. Using data from CEIC as of April 2021, short-term interest rates are measured by three-month money market rates where available.

Interest rate change Apr 2020 – Mar 2021

  • Interest rates fell: 69 countries
  • Interest rates increased: 10 countries
  • Interest rates stayed the same: 3 countries

Across nearly every continent, interest rates have decreased as central banks enacted measures to combat the economic fallout of COVID-19.

Country/ RegionShort-Term Interest Rate Mar 2021 (%)*Short-Term Interest Rate Apr 2020 (%)**Interest Rate Change 2020-2021 (%)
Argentina3112.418.6
Australia0.00.1-0.1
Austria-0.5-0.3-0.2
Bangladesh0.77.1-6.4
Belarus13.910.63.3
Belgium-0.5-0.3-0.2
Bolivia11.58.62.9
Botswana3.54.4-0.9
Cambodia1.81.60.2
Canada0.10.3-0.2
China2.61.41.2
Colombia1.84.6-2.8
Costa Rica3.64.1-0.5
Cyprus-0.5-0.3-0.2
Czech Republic0.40.9-0.5
Denmark-0.2-0.40.2
Ecuador1.01.3-0.3
Egypt9.99.60.3
Estonia-0.5-0.3-0.2
Finland-0.5-0.3-0.2
France-0.5-0.3-0.2
Georgia8.09.0-1.0
Germany-0.5-0.3-0.2
Greece-0.5-0.3-0.2
Hong Kong0.21.7-1.5
Hungary0.81.1-0.3
Iceland1.42.4-1.0
India3.75.3-1.6
Indonesia3.84.9-1.1
Ireland-0.5-0.3-0.2
Israel-0.10.1-0.2
Italy-0.5-0.3-0.2
Japan-0.10.1-0.2
Jordan4.64.7-0.1
Kenya6.97.2-0.3
Kosovo-0.5-0.3-0.2
Kuwait1.51.8-0.3
Latvia-0.5-0.3-0.2
Lithuania-0.5-0.3-0.2
Luxembourg-0.5-0.3-0.2
Macau SAR0.31.7-1.4
Malaysia1.92.8-0.9
Malta-0.5-0.3-0.2
Mauritius0.11.2-1.1
Mexico4.26.2-2.0
Moldova7.08.0-1.0
Montenegro-0.5-0.3-0.2
Morocco1.52.0-0.5
Mozambique13.310.03.3
Nepal1.12.1-1.0
Netherlands-0.5-0.3-0.2
New Zealand0.30.30.0
Nigeria6.910.1-3.2
Norway0.41.4-1.0
Pakistan7.68.2-0.6
Panama0.20.7-0.5
Philippines1.23.2-2.0
Poland0.20.7-0.5
Portugal-0.5-0.3-0.2
Qatar1.11.10.0
Romania1.72.5-0.8
Russia4.76.7-2.0
Saudi Arabia0.81.2-0.4
Serbia0.91.2-0.3
Singapore0.40.9-0.5
Slovakia-0.5-0.3-0.2
Slovenia-0.5-0.3-0.2
South Africa3.84.2-0.4
South Korea0.81.0-0.2
Spain-0.5-0.3-0.2
Sweden-0.20.3-0.5
Switzerland-0.8-0.7-0.1
Taiwan0.50.50.0
Thailand0.60.9-0.3
Turkey208.411.6
UAE0.31.9-1.6
United Kingdom0.10.6-0.5
United States0.00.1-0.1
Uruguay5.010.1-5.1
Venezuela73.823.550.3
Vietnam1.74.2-2.5
Zambia14.016.5-2.5

Source: CEIC (Apr, 2021)
*Bolivia, Botswana, Costa Rica, Japan, Mauritius, Nepal, Qatar, Russia, Slovakia, Zambia have most recent data as of Feb ’21
**Costa Rica, Denmark, Mauritius, Norway & Russia have 2020 data as of Mar 2020

In the U.S., interest rates fell to record lows, dropping by 0.1 percentage points between April 2020 and March 2021. As vaccine rollouts accelerated in 2021, real GDP grew by an annual rate of 6.4% in the first quarter. Unemployment slightly improved to 6.1%, but still remains well above pre-pandemic levels of 3.5%.

Given these variables, the question of whether interest rates will rise is an open one.

Like the U.S., interest rates in the European Union declined, although at a greater rate—from -0.3% to -0.5%. To help improve economic conditions, the European Central Bank promises to purchase $2.2 trillion in government bonds until March 2022.

Together, the euro area, the U.S., Japan, and Britain have produced at least $3.8 trillion in new money supply since early 2020.

Interest Rates: The Steepest Gains and Declines

As money creation and low interest rates have become increasingly common phenomena, the focus has shifted to inflation.

With interest rates reaching 343% in 2020, Venezuela has been a poster child for hyperinflationary forces. Energy shortages only compounded the effect which was well underway before the pandemic. Between April 2020 and March 2021, interest rates jumped over 50 percentage points.

In addition, Turkey and Brazil raised interest rates in March 2021 to dampen inflation. Interest rates in Turkey have increased 11.6 percentage points over the time frame, one of the highest absolute changes globally.

In 2020, the lira faced historic declines, causing the price of imports to climb significantly.

Interest Rates by Country

On the other hand, Bangladesh has seen its interest rates decline 6.4 percentage points, the steepest drop across the dataset. To help offset the effects of COVID-19, the Bangladesh Bank lowered interest rates from 7.1% to 0.7%.

With rates falling 3.2 percentage points, Nigeria has also seen one of the greatest interest rate drops. In March, Fitch Ratings gave the country a B rating with a stable outlook, supported by its low government debt-to-GDP ratio and large economy.

Research has found that countries with better credit ratings and transparent fiscal infrastructure had greater ability for central banks to lower interest rates in response to the crisis.

Sign of the Times

Policy rate changes, a key central bank maneuver, have been an important tool in response to COVID-19.

As economic activity in some countries picks up, interest rates could rise. However, progress in vaccination distribution remains uncertain, especially in emerging markets.

In tandem with this, global central banks are applying unproven monetary policy frameworks, including money creation and large-scale bond purchases. While studies show that interest rates have been falling over the past several centuries, the confluence of these factors will be revealing in the years that follow.

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Markets in a Minute

Mapped: Global GDP Forecasts for 2021 and Beyond

The International Monetary Fund (IMF) revised its global GDP forecasts and anticipates a strong economic recovery from COVID-19 in 2021 and beyond.

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Mapped: Global GDP Forecasts for 2021 and Beyond

In the April 2021 version of its Global Economic Outlook, the International Monetary Fund (IMF) reiterated its expectations of a strong economic recovery over the next few years.

Economists acknowledged that, while the path of the pandemic remains uncertain, global vaccine rollouts represent the light at the end of the tunnel. As a result, global GDP growth forecasts for 2021 and 2022 sit at +6.0% and +4.4% respectively.

In this Markets in a Minute chart from New York Life Investments, we’ve mapped the IMF’s country-level GDP forecasts to see which areas are expected to have the greatest rebounds.

Country-level Data

The following table lists each country’s percentage GDP change for 2020, as well as forecasts for 2021 and 2022.

Jurisdiction2020 GDP Growth (%)2021 GDP Growth Forecasts (%)2022 GDP Growth Forecasts (%)
Afghanistan-5.04.04.5
Albania-3.55.04.0
Algeria-6.02.92.8
Angola-4.00.42.4
Antigua and Barbuda-17.3-3.011.9
Argentina-10.05.82.5
Armenia-7.61.03.5
Aruba-25.55.012.0
Australia-2.44.52.8
Austria-6.63.54.0
Azerbaijan-4.32.31.7
Bahrain-5.43.33.1
Bangladesh3.85.07.5
Barbados-17.64.17.7
Belarus-0.9-0.40.8
Belgium-6.44.03.1
Belize-14.11.96.4
Benin2.05.06.0
Bhutan-0.8-1.95.7
Bolivia-7.75.54.2
Bosnia and Herzegovina-5.53.53.3
Botswana-8.37.55.4
Brazil-4.13.72.6
Brunei Darussalam1.21.62.5
Bulgaria-3.84.44.4
Burkina Faso0.84.35.2
Burundi-1.32.83.7
Cabo Verde-145.86.0
Cambodia-3.54.26.0
Cameroon-2.83.44.3
Canada-5.45.04.7
Central African Republic03.55.0
Chad-0.91.82.6
Chile-5.86.23.8
China2.38.45.6
Colombia-6.85.23.6
Comoros-0.503.6
Costa Rica-4.82.63.3
Côte d'Ivoire2.36.06.5
Croatia-9.04.75.0
Cyprus-5.13.03.9
Czech Republic-5.64.24.3
Democratic Republic of the Congo-0.13.84.9
Denmark-3.32.82.9
Djibouti-1.05.05.5
Dominica-10.4-0.45.8
Dominican Republic-6.75.55.0
Ecuador-7.52.51.3
Egypt3.62.55.7
El Salvador-8.64.22.8
Equatorial Guinea-5.84.0-5.9
Eritrea-0.62.04.9
Estonia-2.93.44.2
Eswatini-3.31.40.9
Ethiopia6.12.08.7
Fiji-19.05.09.0
Finland-2.92.32.5
France-8.25.84.2
Gabon-1.81.22.7
Georgia-6.13.55.8
Germany-4.93.63.4
Ghana0.94.66.1
Greece-8.23.85.0
Grenada-13.5-1.55.2
Guatemala-1.54.54.0
Guinea5.25.65.2
Guinea-Bissau-2.43.04.0
Guyana43.416.446.5
Haiti-3.71.01.0
Honduras-8.04.53.3
Hong Kong SAR-6.14.33.8
Hungary-5.04.35.9
Iceland-6.63.73.6
India-8.012.56.9
Indonesia-2.14.35.8
Iraq-10.91.14.4
Ireland2.54.24.8
Islamic Republic of Iran1.52.52.1
Israel-2.45.04.3
Italy-8.94.23.6
Jamaica-10.21.55.7
Japan-4.83.32.5
Jordan-2.02.02.7
Kazakhstan-2.63.24.0
Kenya-0.17.65.7
Kiribati-0.51.82.5
Korea-1.03.62.8
Kosovo-6.04.55.5
Kuwait-8.10.73.2
Kyrgyz Republic-8.06.04.6
Lao P.D.R.-0.44.65.6
Latvia-3.63.95.2
Lebanon-25n/an/a
Lesotho-4.53.54.3
Liberia-3.03.64.7
Libya-59.71315.4
Lithuania-0.83.23.2
Luxembourg-1.34.13.6
Macao SAR-56.361.243.0
Madagascar-4.23.25.0
Malawi0.62.26.5
Malaysia-5.66.56.0
Maldives-32.218.913.4
Mali-2.04.06.0
Malta-7.04.75.6
Marshall Islands-3.3-1.53.5
Mauritania-2.23.15.6
Mauritius-15.86.65.2
Mexico-8.25.03.0
Micronesia-1.6-3.72.8
Moldova-7.54.54.0
Mongolia-5.35.07.5
Montenegro-15.29.05.5
Morocco-7.04.53.9
Mozambique-0.52.14.7
Myanmar3.2-8.91.4
Namibia-7.22.63.3
Nauru0.71.60.9
Nepal-1.92.94.2
Netherlands-3.83.53.0
New Zealand-3.04.03.2
Nicaragua-3.00.22.7
Niger1.26.912.8
Nigeria-1.82.52.3
North Macedonia-4.53.84.0
Norway-0.83.94.0
Oman-6.41.87.4
Pakistan-0.41.54.0
Palau-10.3-10.810.4
Panama-17.912.05.0
Papua New Guinea-3.93.54.2
Paraguay-0.94.04.0
Peru-11.18.55.2
Philippines-9.56.96.5
Poland-2.73.54.5
Portugal-7.63.94.8
Puerto Rico-7.52.50.7
Qatar-2.62.43.6
Republic of Congo-7.80.21.0
Romania-3.96.04.8
Russia-3.13.83.8
Rwanda-0.25.76.8
Samoa-3.2-7.81.7
San Marino-9.74.53.4
São Tomé and Príncipe-6.53.05.0
Saudi Arabia-4.12.94.0
Senegal0.85.26.0
Serbia-1.05.04.5
Seychelles-13.41.84.3
Sierra Leone-2.23.03.6
Singapore-5.45.23.2
Slovak Republic-5.24.74.5
Slovenia-5.53.74.5
Solomon Islands-4.31.54.5
Somalia-1.52.93.2
South Africa-73.12.0
South Sudan-6.65.36.5
Spain-11.06.44.7
Sri Lanka-3.64.04.1
St. Kitts and Nevis-18.7-2.010.0
St. Lucia-18.93.110.7
St. Vincent and the Grenadines-4.2-0.14.9
Sudan-3.60.41.1
Suriname-13.50.71.5
Sweden-2.83.13.0
Switzerland-3.03.52.8
Syrian/an/an/a
Taiwan Province of China3.14.73.0
Tajikistan4.55.04.5
Tanzania1.02.74.6
Thailand-6.12.65.6
The Bahamas-16.32.08.5
The Gambia06.06.5
Timor-Leste-6.82.84.9
Togo0.73.54.5
Tonga-0.5-2.52.5
Trinidad and Tobago-7.82.14.1
Tunisia-8.83.82.4
Turkey1.86.03.5
Turkmenistan0.84.63.9
Tuvalu0.52.53.5
Uganda-2.16.35.0
Ukraine-4.24.03.4
United Arab Emirates-5.93.12.6
United Kingdom-9.95.35.1
United States-3.56.43.5
Uruguay-5.73.03.1
Uzbekistan1.65.05.3
Vanuatu-9.23.24.6
Venezuela-30.0-10.0-5.0
Vietnam2.96.57.2
West Bank and Gaza-11.05.77.0
Yemen-5.00.52.5
Zambia-3.50.61.1
Zimbabwe-8.03.14.0

Just 27 countries saw positive GDP growth in 2020, including a cluster of Asian economies that includes China, Taiwan, and Vietnam. Although the virus originated in China, the country’s strict lockdowns enabled it to flatten the infection curve relatively quick. As a result, Asia’s biggest economy returned to pre-COVID GDP levels in 2020—something most others aren’t expected to do until 2023.

Forecasts for 2021 are very positive, with the vast majority of countries expected to bounce back economically. Within advanced economies, the U.S. is expected to be a strong performer. The IMF believes that the Biden administration’s new fiscal package, valued at $1.9 trillion, will provide a strong boost to growth.

Looking further to 2022, the IMF expects GDP growth to remain positive around the world. Many European economies will experience positive GDP growth above 3%, including France (+4.2%), Germany (+3.4%), and Spain (+4.7%). The European Central Bank (ECB) has relied on expansionary monetary policy to stimulate its economy during the pandemic, growing its balance sheet by over $2 trillion since February 2020.

Uncertainty Remains, Despite Vaccine Rollouts

Given the unpredictable nature of COVID-19 and its many variants, the GDP forecasts visualized in the above maps should not be interpreted as concrete figures.

India, which was forecasted to grow its GDP by 12.5% in 2021, is now facing the world’s worst surge of COVID-19, fueled in part by the emerging B1617 variant that many are dubbing a “double mutation”.

“We completely let down our guard and assumed in January that the pandemic was over.”
– K. Srinath Reddy, President, Public Health Foundation of India

It remains to be seen if India’s second outbreak will significantly impact its economy, or even the economies of other countries. This situation does, however, serve as a reminder that the virus can still surprise us.

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