Higher Interest Rates May Be the New Normal

Watch on YouTube ↗  |  September 12, 2026 at 14:10  |  9:03  |  Bloomberg Markets
Speakers
Tom Orlick — Chief Economist, Bloomberg Economics

Summary

Tom Orlik argues the world has shifted from a savings glut to a dearth of saving and large investment needs, making higher interest rates the new normal. He expects this to keep bond yields high and raise debt-service costs for governments, businesses and households. Orlik also expects a Fed rate hike next week to preserve credibility, despite political pressure from President Trump.

  • Tom Orlik says higher interest rates may be the new normal.
  • Structural drivers include retiring baby boomers, China and petro-states no longer recycling surpluses into Treasuries, defense spending, and AI investment.
  • US interest payments now account for half the budget deficit, squeezing other spending.
  • Markets price about 90% odds of a Fed hike next week after a hot CPI print.
  • Orlik expects Warsh to hike to protect Fed credibility, even as Trump pushes for lower rates.
  • Long-end Treasury yields are partly elevated on concerns about Fed inflation-fighting credibility.
Ideas
Tom Orlick Chief Economist, Bloomberg Economics 0:43
Iran war pushes oil prices higher
The war in Iran continues and could escalate, pushing oil prices higher and feeding inflation. That oil-driven inflation in turn adds to the case for higher bond yields.
WTI MED
Tom Orlick Chief Economist, Bloomberg Economics 1:44
Structural savings dearth keeps rates high
The global economy has shifted from a savings glut and a shortage of investment to a dearth of saving and huge investment needs. Retiring baby boomers, China and petro-states no longer recycling surpluses into US Treasuries, the end of the post-Cold War peace dividend and higher defense spending, and massive AI investment all point to structural upward pressure on interest rates and bond yields. Higher rates are therefore the new normal, and governments, businesses and households face much higher costs to carry and roll over debt accumulated during cheap-money years.
TLT HIGH
Tom Orlick Chief Economist, Bloomberg Economics 1:44
Structural savings dearth keeps rates high
The global economy has shifted from a savings glut and a shortage of investment to a dearth of saving and huge investment needs. Retiring baby boomers, China and petro-states no longer recycling surpluses into US Treasuries, the end of the post-Cold War peace dividend and higher defense spending, and massive AI investment all point to structural upward pressure on interest rates and bond yields. Higher rates are therefore the new normal, and governments, businesses and households face much higher costs to carry and roll over debt accumulated during cheap-money years.
US Treasury yields HIGH
Tom Orlick Chief Economist, Bloomberg Economics 6:57
Fed hike next week protects credibility
Markets are pricing a high probability of a Fed hike at next week's meeting after higher bond yields and hawkish Jackson Hole comments. Warsh said he would listen to markets, and markets have signaled a hike; failing to hike would damage his and the Fed's inflation-fighting credibility. A hike is what makes sense for the economy and markets, even though it will likely trigger political blowback from President Trump, who wants lower rates.
Fed Funds Rate HIGH
Tom Orlick Chief Economist, Bloomberg Economics 8:47
Long-end yields hinge on Fed credibility
Long-end US bond yields, especially 10-year and 30-year yields, have been high partly because investors worry the Fed is losing credibility as an inflation fighter. If Warsh hikes and restores that credibility, there could be a Goldilocks outcome in long-end rates.
10-Year Treasury Yield 30-year Treasury yield LOW
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This Bloomberg Markets video, published September 12, 2026, features Tom Orlick discussing WTI, TLT, US Treasury yields, Fed Funds Rate, 10-Year Treasury Yield, 30-year Treasury yield. 5 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Tom Orlick  · Tickers: WTI, TLT, US Treasury yields, Fed Funds Rate, 10-Year Treasury Yield, 30-year Treasury yield