Higher Interest Rates to Persist, Forcing Policy Rethink on Debt and Spending
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Interest rates are likely to stay elevated compared to post-2008 crisis lows for the next decade due to high debt levels, deglobalization, increased spending, and persistent inflation.
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The "debt is free" view that supported expanded deficits and social programs is no longer valid given higher interest costs.
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Europe may struggle with higher rates given ultra-low rates glued the eurozone together; "whatever it takes" policies may not work now.
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The US commercial real estate sector is vulnerable, and emerging economies face enormous fiscal pressures.
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Policymakers who believed rates would stay low may need to reassess their beliefs and recognize expanded deficits are no longer costless.