Allison Schrager writes that the U.S. government, financial markets, and many Americans are in collective denial about interest rates. The phrase “when interest rates go back down” is frequently heard, but Schrager argues that rates are unlikely to return to previous lows. Attempts at “financial repression,” or regulatory measures encouraging bond purchases, could lead to more economic pain. With rising debt levels, decoupling global economies, and uncertain inflation forecasts, interest rates are likely to remain high for the foreseeable future. This poses challenges for President Donald Trump’s economic plans, as higher rates increase borrowing costs for both the federal government and the private sector, limiting economic growth. Treasury Secretary Scott Bessent is reportedly focused on lowering yields on 10-year Treasury bonds, while the Federal Reserve remains resistant to rate cuts. Schrager warns that financial repression historically fuels inflation and can lose effectiveness over time, as seen in Japan. Current policies, including adjustments to leverage ratios and cryptocurrency regulations, carry risks such as accelerating inflation or destabilizing the financial system. A guaranteed way to lower rates would be a credible plan to reduce long-term national debt, but such reforms seem unlikely, leaving discussions centered on financial repression instead.
— new from (جريدة البورصة)
