Core Insights - A key interest rate is rising globally, primarily due to the declining appeal of government bonds for safety and liquidity [3] - The "natural rate of interest" has increased significantly since 2019, rising about one percentage point in the US and other advanced economies [4] - Waning interest in government bonds accounts for up to half of the rise in interest rates, influenced by factors such as increased government debt [5] Interest Rate Dynamics - The post-Covid period has shown a significant rise in both US and global interest rates, contrasting with the previous trend from 1990 to 2019 where demand for safety drove government bond yields down [6] - The concept of the "natural rate of interest," or r-star, is crucial for central bank decisions regarding market interest rates [5] Contributing Factors - Other potential drivers for the rise in interest rates include expectations of AI-driven productivity growth, increasing debt-to-GDP ratios, and higher anticipated military spending [7]

Core Viewpoint - Federal Reserve Governor Milan suggests that the rise of stablecoins may lower the U.S. neutral interest rate, known as "r-star," and advocates for interest rate cuts to avoid hindering economic growth [1][3]. Group 1: Impact of Stablecoins - The proliferation of stablecoins could lead to a decrease in the Federal Reserve's benchmark interest rate by approximately 0.4 percentage points [1]. - Stablecoins are increasing the demand for U.S. Treasury securities and other dollar-denominated liquid assets, a trend expected to continue [1][2]. - Even conservative estimates of stablecoin growth indicate an increase in the net supply of lendable funds in the economy, which would further lower the neutral interest rate [3]. Group 2: Monetary Policy Implications - Milan has consistently advocated for a series of rapid interest rate cuts, suggesting a reduction of 50 basis points to align the policy rate closer to his estimate of the neutral rate [3]. - He believes the current neutral interest rate is significantly lower than most of his colleagues' estimates, indicating that the Federal Reserve's current policy stance is overly restrictive and burdensome for the economy [3]. - Milan cites various factors, including changes in immigration policy and tariffs, as additional evidence supporting his view that the neutral interest rate has declined [3].