THURSDAY 30th MAY

The impact of higher nominal interest rates and spreads on debt sustainability differs between advanced and emerging economies. Developed countries, with the ability to issue debt in their own currency and strong international demand for reserves, are partially shielded from rapid increases in real interest rates. However, the risk of fiscal crises is growing due to their high debt stock. On the other hand, developing economies, despite having lower debt stocks, face challenges such as pressure on reserves, currency depreciation, and the effects of volatile capital flows.

During the sessions at the Banque de France, the panel will discuss how fiscal and monetary policies interact in response to the unprecedented rise in nominal rates. It will examine the impact of higher rates on fiscal sustainability in both advanced and developing economies, and how these dynamics influence central bank decisions.