MAINTENANCE – For the chief economist at Oddo BHF, the crucial point is less the level of debt than public spending.
LE FIGARO. – Is the return of inflation bad news for the debt, which exceeds 110% of GDP?
BRUNO CAVALIER. – At first glance, inflation tends to reduce the government debt ratio since nominal GDP (not adjusted for inflation) increases due to the rise in prices. But, conversely, this exogenous inflation shock cuts purchasing power and will weigh on economic activity. To date, the positive effect linked to inflation has outweighed the negative effect stemming from lower volume growth. Obviously, we cannot live with this situation because interest rates can overreact, but we are not there yet.
Read alsoThe impact of inflation on the country’s debt reduction
We are indeed seeing a rise in borrowing rates…
The French ten-year borrowing rate jumped from 0% to around 1% in one quarter, which is violent. Part of it is contagion from US interest rates. In the United States, the economy is overheating, wages are racing and the Fed will raise its key rate sharply…
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