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Rising interest rates will shackle the government — unless Congress acts

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Inflation is hurting every American’s household budget. Because of poor investment choices by the federal government, it is likely to hurt the nation’s budget, too.

A recent analysis from The Post estimates that the Federal Reserve’s interest rate hikes, meant to counteract inflation, have already raised rates on the basket of federal government bonds by 1.9 percentage points. The federal government will have to “roll over” nearly $7 trillion in publicly held debt between March of this year and March 2023, which will have to be refinanced with new debt. That means the government will pay at least $128 billion more in interest payments over that year than it did last year.

I say “at least” because most observers expect the Fed to increase interest rates substantially over the remainder of the year. Market experts expect the Fed’s target interest rate to reach 3.75 percent by year’s end, more than double the current rate. If those predictions are correct — and market analysts typically underestimate the degree to which the Fed raises rates — that means many of those rolled over bonds will offer........

© Washington Post

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