Can central banks get out of fiscal dominance?

F iscal dominance is the well-known situation where monetary policy is required to ensure public debt sustainability, which is no longer ensured by fiscal policy. Fiscal dominance has clearly prevailed since the 2008-2009 subprime crisis in OECD countries, and well before that in Japan. Will the return of inflation get central banks out of fiscal dominance? It is well known that there are large needs for additional public spending (healthcare, education, research, poverty reduction, industry, energy transition, etc.) and that fiscal deficits will spontaneously remain high. This raises the question of what level of long-term interest rates will force governments to move to a more restrictive fiscal policy and not implement the necessary public spending (thus putting an end to fiscal dominance). The nature of the situation of course would then hinge on whether long-term interest rates remain lower than long-term growth (there is then a maximum primary fiscal deficit) or rise above long-term growth (requir ing a primary fiscal surplus). We see that there is very little , if any , room for long-term interest rates to rise if fiscal dominance is to remain in place . If long-term interest rates cannot rise without central banks getting out of fiscal dominance, then the pressure to reduce fiscal deficits will be intense .