"The surreal calm of 2023 gave way to mild euphoria in the closing weeks of the year as inflation fell faster than expected, creating hopes that interest rates will keep falling. This overlooks one key trend.
In a campaign season political leaders are much more likely to raise than cut spending, which means mounting deficits. In the US, Biden spending programmes have already pushed the deficit up to 6 per cent of GDP, double its long-term trend and five times the average for developed economies."....
"Even if inflation fades further, investors probably will demand something extra to keep absorbing the huge supply of government bonds. That means interest rates, long-term rates in particular, will not fall anywhere near as much as they did in previous disinflation cycles."