The economy has undergone a structural transformation that ended the low-cost era

Key Points:

• The U.S. economy is growing steadily and may be accelerating despite repeated shocks and persistent high inflation, with significant borrowing by big tech firms for data center construction and ongoing federal budget deficits contributing to rising interest rates.
• The prolonged era of low interest rates and low inflation since the Great Recession has ended, with the average 30-year mortgage rate recently reaching 6.95%, reflecting a structural economic transformation driven by strong consumer and business demand amid supply constraints.
• Big tech companies are heavily investing in AI infrastructure, borrowing large sums alongside government bond issuance, which has pushed longer-term Treasury yields above 5%, signaling increased competition for lenders and higher borrowing costs.
• Despite economic expansion, many Americans face affordability challenges as inflation outpaces wage growth, and the current growth is considered imbalanced, heavily reliant on AI investment and spending by wealthier consumers benefiting from rising stock prices.
• Political calls for lower interest rates, such as by former President Trump, contrast with the economic realities where policies like those affecting oil prices contribute to inflation and higher borrowing costs, making sustained low rates unlikely.