Signal The gap between growth and interest rates approached zero and may have flipped in the US in 2025

Summary

MGI reports that the difference between nominal growth and long-term borrowing costs has narrowed to close to zero, far tighter than over the past fifteen years or so. The shift reflects notable increases in interest rates in the United States and Europe and lower growth projections for China. Some projections even suggest that in the United States the relationship reversed in 2025, with interest rates now exceeding expected growth. In the report's comparison, US long-term yields moved above growth expectations while the gap narrowed in Germany. This matters because the room to run primary deficits without raising the debt ratio depends on growth staying above the interest rate, as it did in the US in the 2010s.