Analysis-US Fed navigates policy minefield with impending digital dollar report
Raw StoryDec 27, 2021
The Facts
The US Federal Reserve maintained its key interest rate at 5.25-5.5% on Wednesday, hinting that long-run interest rates were higher than previously indicated.
Shifting from its March stance, the Fed has indicated it expects to cut interest rates only once this year, holding on to the 23-year high borrowing costs.
The Spin
Establishment-critical narrative
By holding the rates high, the Fed risks increasing the government's debt costs significantly. This could crowd out important public investments in areas like infrastructure and education. If rates remain high for too long, the cost of borrowing will also remain high, creating severe long-term fiscal challenges. The Fed must reassess its policy.
Pro-establishment narrative
The Fed is keeping interest rates steady despite easing inflation because this is working as intended, and more progress is needed on the inflation front before initiating an interest rate-lowering trend. The Fed has warned that cutting rates too soon could undermine the efforts to control price rises and weaken the economy. Powell is right to stay the course.