WASHINGTON—A senior International Monetary Fund official warned Washington on Thursday not to take for granted its record-low borrowing costs.
With the yield on the 10-year US Treasury bond falling this week below 2 percent for the first time, John Lipsky, until last month the number two at the IMF and now a special adviser to its managing director, Christine Lagarde, said low rates are not a green light for more borrowing.
“It’s easy to claim: If this (US sovereign debt) is a big problem, why is it possible that the US government can borrow on a 10-year term for two percent?” Lipsky said.
“Well, in view of the European experience, it’s pretty obvious that this is not something that can just be taken for granted – favorable market access,” he said, pointing to Europe’s weaker economies like Greece and Portugal now facing double-digit borrowing rates.
“Markets can change their minds, and when they do change their minds they tend to do it in a hurry,” said Lipsky, speaking at a book launch at the IMF headquarters in Washington.
“So to ignore these big problems, even in the biggest economies, would be a real mistake.”