Once the pandemic-induced whipsawing of the economy is well and truly over — and we're back to a world of low inflation and steady growth — there are some (tentative, uncertain) reasons to think interest rates might be higher than what prevailed pre-pandemic.

Why it matters: Everything from asset prices to the U.S. government's fiscal sustainability would face pressure if the so-called long-term neutral rate of interest — and, by extension, the Fed's target interest rate — turns out to be persistently higher than is currently anticipated.

State of play: As of their meeting last month, the median Fed official projected that while their policy interest rate will remain elevated for the next couple of years, in the longer run it will be only 2.5%.

• That's the same long-term projection the policymakers made in December 2019. In other words, they essentially expect the interest rate environment to return to the world of the 2010s once this bizarre economic episode is over.
• Markets broadly agree, as evidenced by long-term rates that are substantially lower than short-term counterparts.
• And the Congressional Budget Office in February projected short-term interest rates will end up even lower — a mere 2.2% by 2026, which underlies forecasts for the U.S. budget deficits and debt.

Yes, but: What if they're all wrong?

What they're saying: Joseph H. Davis, global chief economist at Vanguard, and three colleagues wrote recently that a mix of demographic factors and large budget deficits have driven the long-run neutral interest rate upward.

• By their math, the long-run Fed policy rate is actually 3.5%.
• A higher neutral rate "will require the Federal Reserve to tighten monetary policy more aggressively than presently anticipated, potentially dampening the economic outlook in the short run requiring a swift adjustment from private sector participants," they write.

Some Fed officials themselves are starting to come around to that same view, even if it's not yet the consensus position. In June, one official saw the long-term policy rate as 3.625%, and another as 3.25%.

• A year earlier, none saw the long-term rate being above 3% (their identities are not specified in the Summary of Economic Projections).
• "While revisions over time to the median longer-run dot may or may not convey important information about actual future neutral rates," Matthew Luzzetti, Matthew Raskin and Amy Yang of Deutsche Bank wrote in a note this week, "they would likely fuel market focus on the issue and support increases in far-forward rates."

The bottom line: If interest rates end up persistently higher than is widely anticipated, it would mean a correction ahead for stock and bond markets, and new pressure to rein in fiscal deficits.

Finally, there is some good news in the U.K., which faces the worst inflation problem of any major advanced economy.

What's new: The U.K. Consumer Prices Index rose 7.9% in the 12 months through June, down from the 8.7% in May.

• The most hopeful development was found in the core measure, which excludes energy, food, tobacco and alcohol prices. That showed signs of cooling after months of acceleration.
• Core CPI rose by 6.9%, down from the 7.1% annual rate in May (which was the highest in more than 30 years) — cooler than economists expected.

Why it matters: It's just one month of data. Still, it is an encouraging sign that the nation's sticky inflation may be becoming less so.

Flashback: The data breaks a streak of hot figures that forced the Bank of England to surprise with a half-percentage point rate hike last month, reverting back to an aggressive pace.

• Borrowing costs have also soared as investors price in a higher peak rate in the U.K. The yield on the two-year hit 5.5% earlier this month, surpassing the peak seen during the nation's government crisis last fall. That has huge implications for homeowners, where mortgages reset much more frequently.
• Yields receded in the wake of today's inflation data: as of noon ET, the yield was 4.9%.

What to watch: Policymakers fear tight labor markets will make inflation difficult to stamp out as workers demand hefty pay increases to make up lost ground.

• That possibility looks more likely in the U.K., where wages are rising quickly and service sector inflation remains sticky.