Pimco Sees High Debt Compressing Central Bank Interest Rates
- Central banks constrained by risks to debt sustainability
- Firm has predicted “new neutral” scenario of low rates
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Central bank interest rates are being constrained by high levels of government debt, according to Pacific Investment Management Co.
Debt levels have continued to rise since the financial crisis, especially in emerging markets, Pimco Executive Vice President Nicola Mai said in a report published Tuesday. His analysis suggests that, as a result, policy rates will need to remain very low to ensure that already high government debt-to-GDP ratios don’t increase further.