The New CS Board

[jumanji0881]

There is a limit to how high the Fed will take interest rates - VanEck
https://www.kitco.com/news/2022-09-20/There-is-a-limit-to-how-high-the-Fed-will-take-interest-rates-VanEck.html

My Comment: So higher rates mean higher deficits due not only to lower revenues and increased expenditures from a recession, but also from increased Fed interest payments on its balance sheet.

Excerpts:
Not only do Foster and Casanova not expect the Fed to bring inflation back down to 2% anytime soon, but they said that the central bank could face growing political pressure to end its tightening cycle as rising interest rates will make servicing its debt more expensive.

The Federal Reserve's balance sheet, while falling, is valued at $8.8 trillion.

Quoting data from the Wall Street Journal, Foster and Casanova said that if the Fed raises interest rates to between 3.25% and 3.50%, it would cost the Treasury $195 billion annually to fund the U.S. central bank.

"As the targeted Fed Funds rate (currently 2.5%) rises above 3%, the interest it pays will exceed the revenue gained from its portfolio assets," the analysts said.

In a report in July, the Congressional Budget Office said that the government could end up paying $1.2 trillion in interest payments by 2032.

The analysts said that they expect it's only a matter of time before consumers see inflation as a threat again.

"We believe that at some point, the markets will lose patience with the Fed's talk and see that inflation is indeed out of control. Such an awakening would benefit gold," the analysts said.