2008 saw some of the biggest interest rate shifts in our monetary history - rates rose quickly to their recent highs, and then many rates fell fast. For depositors, rates moved from providing a real, after-inflation return, to one where real returns became negative. The shift was sudden; all in the space of six weeks. For borrowers, rates went up promptly on the back of wholesale cost increases, but have fallen back less promptly, as risk-premiums suddenly became important, and had to be paid. For market watchers, the negative rate curve became quite pronounced as 2008 progressed, accentuating an anomoly that has been around for four-plus years. But suddenly it started to unwind near the end of the year - and the expectation is that we will move to positive rate curves in 2009 - unusual for us, but 'normal' in the grand scheme of things. Bernard Hickey reviews the huge changes we saw in interest rates in 2008.
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