By “normalize” I don’t mean “move to a market-determined level.” That would be impossible, or at least impossible to know, given our central-bank directed fractional-reserve banking system. What I meant was that interest rates are moving up from their recession suppressed levels toward historically normal levels. This movement is being driven by the restoration of demand for credit which has been unusually suppressed by government policies during the so-called Great Recession.
Robert Higgs has written about this:
Of course, the Fed never permits a genuine or pure recovery of our economy. That would necessitate elimination of monetary inflation and credit expansion altogether. So, every post-recession phase of the business cycle in our economy is a mixture of monetary-inflation, credit expansion elements (on the money supply and credit supply sides of those markets) and restoration of entrepreneurial activity (on the money demand and credit demand sides of those markets). Money demand, which skyrockets during the bust, “normalizes” during the post-bust phase and investment, which collapses during the bust, “normalizes” during the post-bust phase.