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. Policymakers must address the growing debt to ensure economic stability.
The Federal Reserve is keeping interest rates steady despite easing inflation because this is is working as intended, and more progress is needed on the inflation front before needed before initiating an interest rate-lowering trend. The Fed has warned that cutting rates too soon could undermine the efforts to control price rise and weaken the economy. The recent buoyant job data for the US, it fears, might be overstated.
There is a 5% chance that the Fed rate on Dec. 31, 2024, will be below 4%, according to the Metaculus prediction community.
© 2025 Improve the News Foundation.
All rights reserved.
Version 6.18.0