Goldman Sachs Group Inc. The U.S. long-term fiscal outlook was updated on Wednesday, predicting debt sustainabilityhandheldpokergameA key indicator of the country will rise to historically extreme levels.
"The outlook for U.S. fiscal sustainability has become more challenging in the past five years," Goldman Sachs economists Manuel Abecasis and David Mericle wrote in a note to clients. "In particular, the expected rise in future interest rates has greatly worsened the trajectory of the debt-to-GDP ratio and the ratio of real interest expenses to gross domestic product."
U.S. Treasury Secretary Janet Yellen has repeatedly cited inflation-adjusted net interest payments as a proportion of GDP as a main measure of debt sustainability. In an interview last year, she said a 1% interest rate was "absolutely okay, there is nothing to worry about."
Goldman Sachs 'latest forecast shows that by 2034, this ratio will steadily climb to 2.5 percenthandheldpokergame.3%。Five years ago, the bank's forecast was 1.5%. In a 2020 paper by Harvard economist Jason Furman and former Treasury Secretary Lawrence Summers argued that policymakers should keep real net interest rates below 2% of GDP.
U.S. interest rates have soared since early 2022 after the Federal Reserve adopted its most aggressive monetary tightening action in decades to curb inflation. As of the end of April, the average interest rate on outstanding U.S. Treasury bills and bonds was 3.3%, up from 1.4% in January 2022.
The Goldman Sachs team also predicts that by 2034, the U.S. debt-to-GDP ratio will rise from the current 98% to 130%.
The team said the underlying fiscal deficit, which excludes the cost of interest on debt, is now about 5% higher as a proportion of U.S. GDP than typical levels during a period of full employment, underscoring the unusual nature of the current budget situation.
Abecasis and Mericle said,"The current fiscal trajectory may eventually push the debt-to-GDP ratio to a level where stabilizing the debt-to-GDP ratio requires fiscal surpluses of historically rare proportions." "Although the United States currently has the conditions for fiscal consolidation, there is little political impetus to reduce the deficit."