“There will be shocks.”"
The US Treasury Department on Friday reported that Washington’s debt interest-cost burden has climbed to a 28-year high, a combination of massive budget deficits and higher interest rates. “I’m very worried about the lack of fiscal space and also whether worries about inflation might lead to suboptimal decisions about the fiscal response to a big shock,” said Karen Dynan, a Harvard Kennedy School professor and former Fed economist. “Monetary policy will face hard trade offs.”
That’s why both geopolitics and debt are top of mind for policymakers gathering in Washington.
“How can you have a soft landing in a world that’s falling apart? I don’t think the US or any economy can soft-land in the current environment,” said Peter Praet, a former ECB chief economist. “There will be shocks.”
World Economy Fault Lines Shift From Prices to Politics and Debt