Indeed, medium and long-term market interest rates are mostly influenced by investors and market players, as the recent so-called “bund tantrum” illustrates. More importantly though, it should be pointed out that for a few decades now we have been witnessing a sort of secular trend towards lower real interest rates.
This trend is related to secular stagnation in advanced economies, resulting from a continuous deceleration of total productivity growth and an increase in planned savings accompanied by less buoyant investment prospects. Monetary policy short-term rates are low because of those developments, not the other way around.