White Papers
The Impact of Interest Rates and Inflation on U.S. Public Pensions: A Credit Perspective
Understanding the risks to municipal credit quality posed by public sector commitments to retirees requires a dynamic analysis that includes considering the effect of prevailing and anticipated interest rate and inflation environments on pension funding.
That analysis is particularly important now: Fueled by recent economic stimulus measures and supply chain issues, inflation is picking up. Amidst uncertainty over whether the uptick in inflation is transitory or part of a longer-term trend, this paper examines the credit implications related to U.S. state and local government pensions of different scenarios for interest rates and inflation.