10 Mar 2015
Federal debt may climb to 77.1% of GDP from 74.1% in 2014 – US CBO Forecast
FXStreet (Mumbai) - The anticipated rise in US interest rates combined with the growing debt size will cause a big jump in net interest costs over the next ten years, the latest budget forecasts from the non-partisan Congressional Budget Office (CBO) showed yesterday.
As the economy strengthens and the Federal Reserve moves to normalize monetary policy rates, the average interest rate on three-month Treasury bills will rise to 3.4% from 0.1% between now and 2025, while the rates on benchmark ten-year Treasuries will go to 4.6% from 2.6%, the agency projects.
At the same time, the chronic budget deficits of around 3% per year over the projection period will swell up public debt to USD21.2 trillion from USD13.4 trillion.
"Together, the rising interest rates and federal debt are projected to more than triple net interest costs - from USD229 billion in 2015 to USD808 billion in 2025; as a percentage of GDP, those costs are projected to increase from 1.3% to 2.9%," the CBO said.
In any case, by the end of the projection period, CBO estimates showed the size of the federal debt will climb to 77.1% of GDP from last year's 74.1%, which has already doubled compared to the pre-recession size.
As the economy strengthens and the Federal Reserve moves to normalize monetary policy rates, the average interest rate on three-month Treasury bills will rise to 3.4% from 0.1% between now and 2025, while the rates on benchmark ten-year Treasuries will go to 4.6% from 2.6%, the agency projects.
At the same time, the chronic budget deficits of around 3% per year over the projection period will swell up public debt to USD21.2 trillion from USD13.4 trillion.
"Together, the rising interest rates and federal debt are projected to more than triple net interest costs - from USD229 billion in 2015 to USD808 billion in 2025; as a percentage of GDP, those costs are projected to increase from 1.3% to 2.9%," the CBO said.
In any case, by the end of the projection period, CBO estimates showed the size of the federal debt will climb to 77.1% of GDP from last year's 74.1%, which has already doubled compared to the pre-recession size.