London (CNN Business) Desperate to save their economies from complete collapse, governments borrowed unprecedented amounts of money on the cheap to support workers and businesses during the pandemic. Now, with recovery in sight , a big risk looms: interest payments. Spurred on by rock-bottom rates, governments issued $16.3 trillion in debt in 2020, and they’re expected to borrow another $12.6 trillion this year, according to S&P Global Ratings. But fears are growing that an explosive economic comeback starting this summer could generate inflation, potentially forcing central banks to raise rates sooner than expected. Should that happen, the cost of servicing mountains of sovereign debt will jump, eating up government funds that could otherwise be spent on essential services or rebuilding weakened economies. US lawmakers approved a mammoth $1.9 trillion stimulus package on Wednesday that could send prices higher and increase pressure on the Federal Reserve. Many economists think the threat of inflation may be overplayed. But political leaders, worried they’ll need to make difficult tradeoffs in the years ahead, are watching the situation closely. “Borrowing costs are affordable right now, but interest rates and inflation may not stay low forever,” UK finance minister Rishi Sunak warned when announcing the British… Read full this story
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