Policy impact on capital market expectations
Need clarification about what inflating away the real value of debt by an accommodative monetary policy means. The situation is that fiscal deficit is high as consequence of government spending. So the amount of debt the government owes is high.
Does it mean that instead of pulling interest rates up (as it would be the case in an high inflation scenario) the central bank may instead be forced by the government to let the interest rates loose so the inflation stays high or even increases making the value (cost) of the debt less significative in real terms?
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