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Federal Reserve rate hike reflects new world of sticky inflation and faster growth
Economists say strong consumer spending, AI data center borrowing and large deficits are keeping long-term rates elevated even after the Fed’s increase.
- On Wednesday, the Federal Reserve raised its benchmark interest rate to 3.9%, prompting President Donald Trump to criticize the hike on Truth Social and argue that U.S. rates should be 1% instead.
- A low-rate, low-inflation world that lasted for nearly 15 years after the Great Recession is over. Persistent inflation and massive AI-related infrastructure investment have driven borrowing costs higher.
- The yield on the 10-year Treasury bond topped 5% this year for the first time since 2023. Consequently, the average 30-year Mortgage rate reached 6.95% last week, the highest in more than a year and a half.
- Chief economist Joe Brusuelas of RSM said the economy's expansion is "imbalanced" and "entirely dependent" on AI-related investment and wealthy consumer spending. Inflation has outpaced annual wage growth for the past five months.
- Broader economic trends, including the Iran war and government deficits, drive rates higher regardless of Fed policy. Elizabeth Pancotti of the Groundwork Collaborative noted that many of Trump's own policies contribute to these higher costs.
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Federal Reserve rate hike reflects new world of sticky inflation and faster growth
President Donald Trump has renewed his attacks on the Federal Reserve after it hiked its benchmark interest rate Wednesday, but the Fed matters less than broader economic trends when it comes to longer-term borrowing costs, economists say.
·New York, United States
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Fed rate hike reflects new world of sticky inflation, faster growth
President Donald Trump has renewed his attacks on the Federal Reserve after it hiked its benchmark interest rate Wednesday, but the Fed matters less than broader economic trends when it comes to longer-term borrowing costs, economists say
·New York, United States
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Total News Sources11
Leaning Left2Leaning Right2Center6Last UpdatedBias Distribution60% Center
Bias Distribution
- 60% of the sources are Center
60% Center
L 20%
C 60%
R 20%
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