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The world went on a debt binge final yr. There could possibly be a nasty hangover

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.

Waiting for inflation

Concerns about rising interest rates have come into focus as investors offload…

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