High government debt makes fighting inflation more expensive, forcing central banks to choose

When governments have a lot of debt, raising interest rates to fight inflation becomes much more costly for the government itself. This means central banks might have to choose between controlling prices and keeping the government solvent.

For decades, central banks could raise interest rates to cool down an overheating economy without worrying too much about the government's balance sheet. This paper shows that high national debt changes that equation. Governments will now probably face a direct trade-off: either let inflation run higher or pay significantly more in interest on their existing debt.