Federal Reserve pauses hikes, but government borrowing to keep rates rising, adding to deficits

The Federal Reserve is expected to pause interest rate hikes, but borrowing costs will keep rising as the government continues heavy borrowing.

Higher government borrowing costs will add to deficits and debt, putting pressure on Biden and Congress to reduce deficits.

Political dysfunction is seen as a key reason for pessimism about improving the fiscal outlook.

While some say debt levels are manageable, persistent high rates could slow the economy and raise concerns.

Fed policy and fiscal outlook are linked, as higher rates slow activity, potentially limiting further Fed hikes.