2024-03-16 07:36:27
It is unlikely that market interest rates will return to the levels that prevailed before the COVID-19 pandemic triggered a wave of inflation and higher bond yields, US Treasury Secretary Janet Yellen said.
As Day.Az reports with reference to Interfax, her opinion is quoted by Bloomberg.
Asked by reporters why White House forecasts released this week show markedly higher expectations for interest rates in the coming years than estimates a year ago, Yellen said the new numbers were in line with private business expectations.
“I think this reflects current market realities and the forecasts that we see in private business – it is unlikely that profitability will again become as low as before the pandemic,” the head of the Ministry of Finance noted.
The 10-year US Treasury yield averaged 2.39% per annum in the decade to 2019 – low by historical standards. It jumped above 5% last October after the Federal Reserve launched an aggressive rate hike to fight inflation, and now sits just below 4.2% annually.
There has been considerable debate among economists about whether rates will return to pre-pandemic levels or stabilize higher in the long term.
Yellen said: “It is important that the assumptions we put into the budget are reasonable and consistent with the thinking of a broad range of forecasters.”
The budget for fiscal year 2025, which was presented on March 11, included the yield of 10-year government securities this year at an average of 4.4% per annum. In March last year it was forecast to be 3.6%. Expectations for the yield on three-month government bonds are now 5.1% versus 3.8% a year ago.
At the same time, higher rates significantly increase the overall budget deficit and debt ratios. Current White House forecasts show the US will spend about $890 billion, or 3.1% of GDP, on net interest expenses this year.
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