Howard Marks: US Interest Rates Are Normal, Not Historically High

Current Interest Rates Higher Than Recent Past, But Within Historical Norms

At the Moneycontrol Global Wealth Summit 2025, Howard Marks, Co-Chairman of Oaktree Capital Management, provided a fresh perspective on the current US interest rate environment. He emphasized that while rates have risen compared to recent years, they are not historically high. Instead, he argued that the ultra-low interest rates from 2009 to 2021 were an exception, not the norm.

According to Marks, the market’s preoccupation with the phrase “higher for longer” is misleading, as it compares current rates only to the artificially low borrowing costs of the past decade rather than taking a long-term historical view.

US Interest Rate Trends: A Shift from Ultra-Low Levels

Marks highlighted that from 2009 to 2021, the Federal Reserve maintained interest rates at an average of 0.5%, an unprecedented period of low borrowing costs designed to support economic recovery after the 2008 financial crisis and during the COVID-19 pandemic.

However, as inflation surged in 2022, the Fed embarked on an aggressive tightening cycle, pushing rates up to 5.25%-5.50% in an effort to curb rising prices. In 2024, the Fed began a more measured approach, cutting rates by 1% since September. Currently, the federal funds rate stands between 4.25% and 4.50%, still above pandemic-era lows but well within historical norms.

Howard Marks: “The US Economy Doesn’t Need Artificially Low Interest Rates”

One of Marks’ key takeaways was that the US economy does not require extremely low borrowing costs to sustain growth. He noted that despite concerns over monetary policy tightening, the economy remains in good shape, experiencing steady growth without overheating or stagnating.

• Current interest rates do not pose a significant burden on economic expansion
• The Federal Reserve’s measured approach is helping stabilize inflation without causing a slowdown
• Historical data suggests that rates remain within a sustainable range for long-term growth

Market Overreaction to Interest Rate Movements

Marks also addressed the market’s tendency to react sharply to interest rate decisions, particularly the expectation of rate cuts. He suggested that investors should adopt a broader perspective, focusing on economic fundamentals rather than short-term fluctuations in monetary policy.

“The market has become too fixated on the idea that rates must go lower,” he said. “But the reality is, the economy is functioning well at these levels, and there is no need for an immediate cut.”

This stance aligns with the Federal Reserve’s cautious approach, where policymakers are waiting for clear signs that inflation is moving sustainably toward the 2% target before considering further rate adjustments.

Insights from Howard Marks on Interest Rates and Economic Growth

1. Interest rates are not historically high – They are only higher than the exceptionally low levels of the last decade.
2. The Federal Reserve has transitioned from aggressive hikes to a balanced stance, maintaining rates at 4.25%-4.50% after cutting by 1% since September 2024.
3. The US economy is resilient – Growth remains steady and sustainable without the need for ultra-low interest rates.
4. Markets may be overly focused on rate cuts, despite the fact that the economy is performing well under current conditions.
5. Investors should take a long-term perspective, recognizing that the post-2008 low-rate environment was an anomaly, not a baseline.

The Future of US Interest Rates: What to Expect?

Marks’ comments suggest that while interest rates may decline slightly, they are unlikely to return to the near-zero levels seen in the past decade. The Federal Reserve is prioritizing inflation control while ensuring that economic growth remains stable.

With the US labor market strong, inflation moderating, and consumer spending resilient, the central bank has little incentive to cut rates aggressively. Instead, the focus will be on maintaining monetary stability while responding to economic data as it evolves.

For investors and businesses, this means adjusting to a world where borrowing costs are moderate but manageable. Rather than expecting a return to the era of free money, companies and investors should plan for an environment where interest rates fluctuate within historically normal ranges.

A Realistic Perspective on US Interest Rates

Howard Marks’ insights challenge the market’s short-term focus on interest rate movements. He urges investors to consider the broader historical context, recognizing that today’s rates are not high but rather adjusting from an era of extreme monetary stimulus.

As the US economy moves forward, the focus should remain on fundamentals, such as corporate earnings, productivity, and inflation trends, rather than reacting to every Federal Reserve policy decision.

With moderate interest rates, a resilient economy, and stable monetary policy, the US remains positioned for sustainable long-term growth, even without the crutch of artificially low borrowing costs.