"Potential Pitfalls: The Fed's Interest Rate Pause and Biden's Break"

While Federal Reserve Chair Jerome Powell is expected to hold interest rates steady, the US government's continued borrowing at higher rates will fuel deficits and debt, putting pressure on President Joe Biden and Democrats to reduce deficits. Political dysfunction is cited as a reason for pessimism about the fiscal outlook. The US Treasury's borrowing plans have come into focus as the government faces the possibility of a shutdown. Rising yields are also attributed to the mechanical reaction of more supply and fewer buyers, as the Fed shrinks its holdings of Treasury securities. The Fed's moves and the fiscal outlook are linked, and if rates stay high, it could slow economic activity. The resilience of the economy will determine the outlook for inflation and how long rates will remain high.