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NH Securities: 'Era of Fiscal Dominance' Makes Central Bank Rate Hikes More Difficult
Finance · Investment Banks/Brokers · yonhap_finance · 2026-09-09
005940
NH Investment & Securities warns that rising national debt and security-focused industrial policies are forcing central banks into a corner, raising the threshold for future interest rate hikes.
What Happened
Rise of Fiscal Dominance: NH Investment & Securities suggests that the global economy has entered an era where fiscal policy dictates the direction of monetary policy due to ballooning national debt. With global bond issuance projected to hit $29 trillion by 2026, emerging markets are seeing particularly rapid debt accumulation.
Shift in Industrial Policy: Since 2020, industrial policy has pivoted from simple competitiveness to national security and supply chain restructuring. This structural change has made government spending a constant, as nations prioritize strategic autonomy over traditional market-driven investment.
Monetary Policy Constraints: Central banks face a dilemma where raising interest rates to combat inflation risks stifling corporate investment and ballooning government debt servicing costs. Consequently, the threshold for rate hikes has risen significantly as the fiscal burden becomes a permanent fixture of the economic landscape.
Changing Role of Central Banks: As fiscal policy takes the lead, central banks are expected to shift away from proactive guidance toward more passive, rule-based policy frameworks. Analysts note that this environment makes central bank communication and future policy paths increasingly ambiguous.