Can the Federal Reserve Keep Rates High Without Breaking Something?

The Federal Reserve is expected to leave interest rates unchanged at its October 27-28 meeting, even as inflation remains above its 2% target and oil trades above $100. Analysts at the Kobeissi Letter estimated that if rates run 150 basis points—1.5 percentage points—above the Congressional Budget Office’s February baseline through 2036, cumulative deficits could rise by $6 trillion and public debt could reach 133% of GDP; a 50-basis-point overshoot could add nearly $2 trillion and lift debt to 124%. Governor Christopher Waller said hikes would probably be needed if the economy develops as expected while Chair Kevin Warsh avoided committing to a move. A Reuters poll found nearly all economists expect no October hike and one in December.