Signal MGI argues rates are structurally higher, pushing debt ratios up absent policy change

Summary

MGI argues that there are several reasons to expect interest rates to stay structurally higher than they were before the pandemic. The factors it cites are higher planned investment, lower planned saving, and greater risk, for example from shifting geopolitics and mounting public debt. These arguments draw on a broad body of academic research on the natural rate of interest after the pandemic. If rates remain elevated relative to growth, fiscal budgets could come under pressure. Unless governments take major steps to cut borrowing, the report expects debt-to-GDP ratios to keep rising.