Central Banks
Yesterday’s QE Saddles Today’s Governments With Soaring Debt Costs
- Central banks are paying ever-higher interest on bank deposits
- Fiscal hit set to affect budget discussions in UK, US
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When borrowing costs rise, governments end up paying more interest. That fiscal blow is now landing faster than it used to.
The reason: Advanced economies are in effect paying floating rates on a large chunk of their national debts — the result of more than a decade of bond purchases by their central banks. And with short-term interest rates rising rapidly, floating-rate debt has gotten expensive.