Surging interest rates are intensifying the challenges for the U.S. economy and threatening to derail the Federal Reserve’s drive to tame inflation without causing a deep recession.
Since mid-summer, the yield on the 10-year Treasury note, a benchmark for many loans, has steadily climbed, causing a spillover rise in other borrowing costs. The costs of mortgages, auto loans and credit card debt have all risen in response. The collective impact of higher rates across the economy could also weaken the government’s own finances.
The jump in longer-term rates coincides with other threats, from higher gas prices and this week’s resumption of student loan payments to autoworkers’ ongoing strike and the risk of a government shutdown next month, all of which could leave consumers with less money to spend to power the economy.
The strike by the United Auto Workers, now in its third week with no resolution in sight, could reduce vehicle sales in coming months. And the threat of a government shutdown, narrowly averted this past weekend, looms large, especially given the chaos over the leadership of the House of Representatives. Far-right Republican House members deposed their leader, Rep. Kevin McCarthy, on Tuesday for working with Democrats to temporarily avoid a shutdown.