What effect does a large federal deficit might have on interest rates?

Question

What effect does a large federal deficit might have on interest rates

Answer 1

It will put pressure on interest rates to rise. When the federal government runs a deficit it must borrow money to finance its expenditures. The increase in demand for loanable funds will raise the interest rate at which funds are loaned.

See also, the crowding out effect

Answer 2

Upward. Larger deficit means more borrowing by the federal government. More borrowing, other things being equal, means higher interest rates.