JPMorgan interest rates warning points to debt and demographics
JPMorgan says rising deficits and aging populations could push borrowing costs higher as global debt reaches $251 trillion.
By Maya Lindqvist · Senior Technology Correspondent
3 min read
JPMorgan interest rates warnings are focusing on two forces the bank says are fading: fiscal restraint and favorable demographics. In a research note, Joyce Chang and her team said government deficits and aging populations are likely to add upward pressure to borrowing costs around the world.
The warning comes as debt loads remain high. The IMF reported in 2025 that governments, companies and households worldwide owed $251 trillion, while JPMorgan said global public debt has reached $100 trillion.
Chang’s team framed its outlook around six forces shaping the global economy: deficits, deregulation, decarbonization, depopulation, deglobalization and dedollarization. Of those, JPMorgan singled out deficits and population decline as key risks for interest rates.
Why does JPMorgan expect interest rates to rise?
JPMorgan said larger deficits are reducing governments’ room to respond to future shocks and are pushing rates higher. Fiscal space means a government’s ability to spend more or cut taxes without putting its financial position at risk.
The IMF said governments have relied heavily on fiscal stimulus, including higher spending and tax cuts, during the Iran crisis. JPMorgan said those moves have often come without clear plans to offset the lost revenue or added spending.
Economists disagree on how strongly deficits affect interest rates. One concern is that growing government debt can make investors question a country’s creditworthiness, which may lift borrowing costs and add inflation pressure if central banks respond by expanding the money supply.
In the United States, JPMorgan said a larger debt stock, higher rates and limited political appetite for deficit reduction point to a higher term premium. A term premium is the extra return investors demand to hold longer-term bonds instead of shorter-term debt.
The bank also said the U.S. has avoided more serious economic damage from its fiscal deficit because it still has more fiscal room than many other countries. JPMorgan described the U.S. as the safest and strongest country during geopolitical strain, but said the debt outlook could worsen if major military, political, energy-security or economic setbacks changed that perception.
How do aging populations affect borrowing costs?
JPMorgan said shrinking birth rates and older populations in advanced economies will strain public finances. A smaller workforce has to support rising demand for pensions, health care and services used by retirees.
The bank said governments also face growing pressure to spend on defense, renewable energy and infrastructure. Without higher revenue, cuts elsewhere or a better gap between interest rates and economic growth, JPMorgan said those spending demands imply a substantial rise in public debt in many countries after 2031.
In the U.S., the Committee for a Responsible Federal Budget’s Social Security Countdown puts the point at which benefits would have to be cut at seven years and 10 months. JPMorgan said neither political party is expected to act until the Social Security cliff approaches in 2032.
The bank said addressing the shortfall could require about $600 billion in additional debt, along with possible spending cuts and tax increases. It also warned that aging populations and longer lifespans could reduce savings and put pressure on returns, including in funded retirement systems.
JPMorgan’s conclusion is that the demographic lift that helped hold rates down over the past four decades is fading. Chang’s team said depopulation remains an underappreciated risk because lower savings can contribute to higher interest rates.
This story draws on original reporting from Fortune.