Howard Marks at GWS 2025: ‘US interest rates are not high, just higher than the recent past’

Howard Marks at GWS 2025: Current interest rates remain below long-term historical averages.

US interest rates are not historically high but rather within the bounds of normalcy, according to Howard Marks, Co-Chairman of Oaktree Capital Management. Markets have fixated on the idea that interest rates will remain “higher for longer,” said Marks at the Moneycontrol Global Wealth Summit 2025. However, this perspective is misleading because it only considers the recent past rather than historical trends, he added.

"Interest rates are not high. Everybody says rates will be higher for longer, but they are only higher than the recent past -- not higher in the absolute sense," Marks said. He pointed out that from 2009 to 2021, the Federal Reserve kept interest rates at historically low levels, averaging about 0.5 percent. "That was the abnormality," he said, adding that the current rates, while above those pandemic-era lows, remain below long-term historical averages and could even decline somewhat in the coming years.

Also read | ‘Growing Indian miracle’: Legendary investor Howard Marks says don’t want to miss out on India of the next 10 years

The United States Federal Reserve has shifted from an aggressive rate-hiking cycle in 2022-2023 to a more measured approach, maintaining rates in the 4.25-4.50 percent range after cutting by 1 percent since September 2024. This marks a shift from the post-pandemic tightening phase, when the Fed rapidly raised rates to curb inflation, peaking at 5.25-5.50 percent. Fed officials remain cautious about further rate cuts, waiting for clear evidence that inflation is sustainably moving toward the 2-percent target.

According to Marks, today’s interest rates are not a burden on economic growth. The US economy is in good shape -- not overheating, but not struggling either; it’s growing at a steady, healthy pace, he said. The present level of interest rates, or even a slight moderation, would be appropriate, as there is no immediate need for either aggressive stimulus or restrictive tightening, he added.

Marks also cautioned against the market’s tendency to react sharply to rate movements, with stock prices often surging at the prospect of lower interest rates. He suggested that markets may be overly focused on rate cuts, as the economy does not need artificially low borrowing costs to function well.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.