// definition
Fiscal dominance
When debt constrains the central bank
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Short definition
The situation in which the weight of public debt constrains monetary policy: the central bank hesitates to raise or hold rates high for fear of making the debt unsustainable, letting inflation erode its value instead. The opposite of a central bank free in its choices.
risk atlas
Knowledge map
Intuition
Fiscal dominance appears when the political and budgetary cost of the debt curtails the central bank's freedom.
Why it matters now
The signal grows more relevant when the interest burden, the primary deficit and refinancing needs rise at the same time.
Related analyses
- The return of the term premiumDecomposing the long rate and the US debt regime.
Related guides
- Reading the CBO outlookFiscal trajectory and the interest bill.
- Reading the Treasuries marketCurve, auctions, holders and the term premium.
Related datasets
- risk.jsonPublic snapshot of the risk signals.
- debt-risk.jsonDebt Risk Radar snapshot with provenance.
- risk-diff.json1, 7 and 30-day diff of signals, sources and models.
- signals/history.jsonPoint-in-time history of the signals.
Signals using it
- MethodologyDebt, interest burden, current stress and structural vulnerability.
- Risk DiffRecent change in risk and source freshness.
- Black Box RecorderHashed frames to replay a point-in-time state.
Primary sources
- Federal Reserve & FREDRates, the Fed balance sheet, FRED series and the New York Fed ACM model.
- U.S. Treasury Fiscal DataDebt, Treasury cash, DTS and auctions.
- U.S. Treasury TICCross-border holdings and flows of Treasuries.
- Congress.gov, GovInfo & CBOBudget projections, texts and estimates.
- Bank for International SettlementsGlobal debt, banks and market fragilities.