Is the two-decade era of low interest rates over? The Fed has to decide.

The Federal Reserve faces a consequential debate: whether the era of persistently low interest rates that followed the 2008 financial crisis has truly ended. For roughly two decades, central banks in major economies kept policy rates near zero, and in some cases below it, as inflation remained subdued and growth sluggish. That backdrop shaped borrowing costs for governments, businesses, and households alike.

Now, elevated bond yields are forcing a reassessment. The key question is whether these higher yields reflect temporary factors — such as post-pandemic supply disruptions or shifts in inflation expectations — or a more durable change in the economic landscape. If the latter, the implications would be significant: higher government borrowing costs, pressure on equity valuations, and a different calculus for debt-dependent sectors.

What to watch: the Fed's own projections for the longer-run neutral rate, the trajectory of inflation, and whether bond markets stabilize or continue repricing. The answer will shape investment conditions for years, not just quarters, and it hinges on whether recent shifts prove cyclical or structural.