“The Federal Reserve raised the benchmark interest rate by 75 basis points on June 15, the largest rate hike since November 1994, as part of its effort to tame soaring inflation.”
https://www.theepochtimes.com/fed-raises-interest-rates-by-three-quarters-the-largest-increase-in-28-years_4534321.html?utm_source=Morningbrief&utm_campaign=mb-2022-06-16&utm_medium=email&est=Ax6PlYvbX0SVZN1yTOnzbgtSZsjDuykjvwUhENPThyukorVx9iquOTeF6bQ%3D
The Fed is between a rock and a hard place. With over $30 trillion in federal debt, the government must make good on interest payments. When interest rates rise and old debt is reissued as new debt (debt turnover), those higher rates mean higher interest payments which we can’t afford…unless we issue even more debt. At the same time inflation is a hammer on families and the economy as whole… Something has to give. We’ll see what will give in the coming months.
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Published by markskidmore
Mark Skidmore is Professor of Economics at Michigan State University where he holds the Morris Chair in State and Local Government Finance and Policy. His research focuses on topics in public finance, regional economics, and the economics of natural disasters. Mark created the Lighthouse Economics website and blog to share economic research and information relevant for navigating tumultuous times.
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