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In response to the Covid-19 crisis, the debt-to-GDP ratio in advanced economies will rise to an all-time high of 130% of GDP this year. At the same time, long-term interest rates are at an all-time low.
To boost growth after the Covid-19 fallout, Germany and France have introduced large stimulus packages which in terms of magnitude are playing in the same league. Digging below the surface however unveils deeply diverging approaches to boost the recovery.
At its meeting on 16 September, the last before the election, the U.S. Federal Reserve confirmed our expectations that it will keep rates at 0% into 2023, and let inflation run higher than 2% for an extended period.