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A $1 trillion US budget deficit could lead the Fed to cut rates

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If low inflation, a wobbly economy and tariff jitters weren’t enough to push the Federal Reserve to lower interest rates, there’s also the simple reason of the swelling national debt.

The recent debt deal struck between the White House and Congress virtually guarantees trillion-dollar deficits well into the future as well as continued acceleration of the government’s collective IOU, which is now at $22.3 trillion.

Trying to finance all that red ink is going to be tricky. Investors will need to be willing to sop up all that paper and may want a little extra yield for doing so.

With all that in mind, the Fed could have no choice but to lower rates, unless it wants to go back to buying…



Source cnbc.com

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