LONDON — The cost of borrowing on a monthly basis is on the rise as more people are moving their savings into the financial markets.
But the move to buy shares or bonds is more likely to lead to a higher interest rate than a normal monthly payment, a new report by the International Monetary Fund (IMF) said.
The IMF forecast that a 10% increase in the value of the British pound would push inflation to 4.2% this year from 2.7% in the first half of the year.
That would lead to the cost of a typical monthly payment on the debt-based asset-backed securities, or debt-funded bonds, increasing by about $2,000, or 7% of a monthly household income.
That’s about $3,000 more than in the year-ago quarter, the report found.
More from the Financial Times:Banks have started to make money by selling bonds to customers and selling assets to investors, the IMF said.
But those purchases and sales will take longer than in previous years, the authors of the report said.
In the first six months of 2017, the U.K. government bought $1.3 trillion worth of debt-backed assets, up from $1 trillion in the same period a year earlier.
The Treasury’s asset-based lending program accounted for nearly one-fifth of total asset purchases.
The IMF expects that the government will spend nearly $1,300 a day on its asset-funded program over the next five years, up to $12.6 trillion.
“This is a period of significant uncertainty,” said IMF Chief Economist Peter Navarro, who also led the panel that wrote the report.
“It is hard to see the U, S. and European economies recovering at the same time as interest rates rise.”
Investors and governments have been trying to convince investors to invest in more assets, and to take on more debt, in hopes of boosting the economy and boosting their economies’ long-term growth potential.
The IMF report suggests the biggest impact will be on the U