Martin Flodén in EFN about rising long-term interest rates

The US Treasury announced this week that it is expanding its buyback programme for government bonds, which has led to a slight decline in long-term interest rates. At the same time, US government debt continues to grow, making the US economy increasingly costly and vulnerable.

Long-term interest rates have also risen in Japan, France and the UK, Martin Flodén says in the EFN interview.

“In countries with high levels of government debt, rising interest rates lead to a significant increase in interest costs. This fuels concerns about the sustainability of public finances, which in turn pushes interest rates even higher. There is a risk of a self-reinforcing cycle of negative expectations.”

Governments need to cut spending or increase tax revenues, Martin Flodén argues, but he does not expect this to happen in the current situation.

“It often takes some kind of financial crisis to force governments to address these problems, even though it would be better to do so beforehand. But political support for such measures is not always forthcoming at that point,” Martin Flodén concludes in EFN.