No wonder the White House wants Warsh to cut: A 1% Fed rate hike costs the Treasury an extra $95 billion a year in national debt interest
Source: Fortune ·
"Even if primary deficits remain largely unchanged, the growing interest burden materially increases the government's financing needs," the analysts wrote.
From the source
There are many—none particularly surprising—reasons politicians and policymakers push central banks for a lower base interest rate. It makes borrowing cheaper and stimulates the economy, potentially leading to more jobs and home purchases.It also, conveniently, makes the government’s own borrowing costs cheaper.While leaders the world over have lobbied for lower base rates for these reasons, none have done quite so forcefully as President Donald Trump and his team: First, going to extraordinary lengths—including personal insults and a criminal investigation—against previous Fed chairman Jerome Powell, and now the broader Federal Open Market Committee (FOMC) led by new chairman Kevin Warsh. Trump and his team have suggested that rates are too high, hurting consumers’ chances of owning a home as a result (mortgage rates are tied to long-dated rates). But Bank of America has also put a figure on the cost to the government of elevated interest rates. “Clients are concerned about U.S.…