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[Analysts: High Interest Rates Don't Necessarily Mean Pessimism; Economic Resilience Strengthens, Neutral Interest Rate Expectations Rise] 1. Amid soaring global borrowing costs, some economists see positive signs: the economy is strong enough to withstand them. Central banks in developed countries have raised interest rates to curb inflation driven by the Iran war, and government bond yields have risen to multi-decade highs, but the global economy continues to show resilience. Investors expect central banks to not only continue tightening but also maintain higher interest rates for the foreseeable future. Strong economic performance is attributed to a surge in AI investment, which economists hope will boost future productivity. 2. Rising interest rates increase the cost of business investment and home purchases and dampen demand, but there are signs that the overall economy can withstand them. Stock markets are performing better than feared, corporate profits are strong, AI trading is active, and funds have not flowed significantly from stocks to high-yield bonds. Goldman Sachs' chief European economist, Stern, said that the economy's ability to withstand higher interest rates is a positive sign because there is more underlying growth. Economists are raising their expectations for the "neutral interest rate." The neutral interest rate is difficult to observe directly; faster growth and rising price pressures indicate that policy rates are below the neutral level. 3. Federal Reserve Chairman Warsh said the neutral interest rate is "academically useful" but irrelevant to policy decisions. Goldman Sachs points out that the latest Federal Reserve forecasts show the median expected neutral interest rate has risen from 3.1% to 3.25%; the upper limit for the neutral interest rate in the Eurozone is 2.5%, and Japan's has also risen by about 0.25 percentage points. Oxford Economics' Harlemberg states that rising neutral interest rate expectations are fueling a sell-off in long-term government bonds, predicting a further 0.5 percentage point increase in the US neutral interest rate and about 0.25 percentage points in the Eurozone over the next five years. 4. Expectations of AI-driven productivity gains have contributed to the rise in neutral interest rates in the US and Europe, but Europe's adoption is slower, and the impact will take longer. Harlemberg states that more productivity growth leads to more tax revenue, making higher interest rates easier to manage. Other contributing factors are more worrying, such as rising government debt. Since the 1980s, the neutral interest rate has generally declined, partly due to increased savings demand from an aging population, weakened interest in productive investment, and a "global savings glut." Warsh argues that the savings glut is over, and the current period is one of surging global investment. 5. Central banks may welcome higher neutral interest rates, as this provides more room for rate hikes to combat inflation and also leaves room for rate cuts to stimulate the economy during downturns. University College London Professor Rachel stated that low interest rates are like canaries in a coal mine, foreshadowing a bleak outlook; a rise in the neutral interest rate is good news, but she worries that a sharp increase in yields could catch some governments off guard and make it difficult for them to pay interest.