MNI: Global Borrowing To Slow On Policy Risk, High Rates- IIF
MNI (WASHINGTON) - Global borrowing will slow again this year with companies hindered by political uncertainty and less scope for falling interest rates, according to an Institute of International Finance report published Tuesday.
That would be another slowdown after last year's pace faded to USD7 trillion from USD16 trillion in 2023 when borrowing was spurred by Federal Reserve rate cuts, the report said. Borrowing already slowed in the final three months of last year, the IIF said-- a time when Fed officials talked of sticky inflation and Donald Trump and Republicans won U.S. elections on an "America First" platform.
"With market expectations for future Fed rate cuts diminishing amid concerns over the implications of the U.S. trade and immigration policies on inflation, we see the slower pace of global borrowing as a precautionary stance given significantly heightened uncertainty," said the IIF report. The Washington-based group represents financial companies and is led by former senior Treasury Department official Tim Adams.
The document titled "Return of the Bond Vigilantes" said government borrowing will remain high this year at more than USD5 trillion, led by the U.S., France, China, India and Brazil. “While market reactions to rising government debt levels in the U.S. have been relatively muted despite its debt remaining on a `non-stabilization path,' robust economic activity, productivity growth, and the safe-haven status of U.S. Treasuries continue to mask the deepening weaknesses in U.S. fiscal balances.”