Higher path for rates boosts need to lift revenue, says Yellen
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Treasury Secretary Janet Yellen says the outlook for higher interest rates over the long haul makes it tougher to contain US borrowing needs. Yellen emphasized the importance of boosting revenue in negotiations with Republican lawmakers. The Biden administration's budget proposals aim to ensure a sustainable fiscal trajectory. Yellen highlighted the metric of inflation-adjusted interest payments compared with GDP, aiming to keep it below 2%. Goldman Sachs economists project net real interest payments reaching 2.3% by 2034. Soaring interest rates have made it more expensive for the government to service its debt. Yellen mentioned the upcoming tax negotiation and the need to pay for any extended provisions through new revenue. She suggested implementing the 2022 global corporate minimum tax deal as one way to fund the provisions. Biden's budget includes tax hikes on capital gains and on households worth at least $100 million. Yellen's views on borrowing costs have shifted, as she previously suggested longer-term yields could come down.

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