Tightening now risks inflicting a shock to a world economy already on edge as war rages in the Middle East.

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Debt levels are at record high levels at the same time that we’re in this higher-for-longer interest-rate environment. There is a lot that could go wrong.

World’s Higher-for-Longer Rate Era Stokes Worry

(Bloomberg) — Now that the higher-for-longer interest-rate era has arrived, global finance officials are getting worried about the consequences.

Rising long-term bond yields signal investors increasingly believe cheap borrowing is over. Multiple attendees at the International Monetary Fund’s meetings this week cautioned that the wholesale tightening now risks inflicting a shock to a world economy already on edge as war rages in the Middle East.

“Debt levels are at record high levels at the same time that we’re in this higher-for-longer interest-rate environment,” Gita Gopinath, the No. 2 official at the IMF, told a panel hosted by Bloomberg’s Tom Keene. “There is a lot for us to watch carefully — and that could go wrong.”

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She and peers gathered in the Moroccan city of Marrakech don’t need to stretch their minds back far for an example. Their nerves were tested this year with a string of regional US bank collapses, followed by real estate jitters that have yet to dissipate.

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The IMF meetings, held alongside the World Bank, mark the first time finance ministers and central bankers have gathered to discuss the outlook since the Federal Reserve’s symposium in Jackson Hole in August put investors on notice that restrictive monetary policy might need to endure.

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