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You are not actually responding to my argument. I was arguing that the Fed does not care about the cost of servicing the Government debt. I wasn't arguing about
by credit_guy 4y ago
You are not actually responding to my argument. I was arguing that the Fed does not care about the cost of servicing the Government debt. I wasn't arguing about how much the Fed will hike. They will stop hiking when they consider fit, but the interest on the Government debt will not be one of the factors they'll include in their decision.
- zarzavat 4y agoThey definitely care about second-order effects. If for example they raise the rates enough that debt servicing starts to become a real issue and this leads to higher taxes and spending cuts, then that is an extra economic headwind which they must consider. They don’t care about the debt figure per se but they do care about the economic implications of that debt, and how other entities are likely to react to it.
- chii 4y ago> If for example they raise the rates enough that debt servicing starts to become a real issue then they would've realized they hiked too much. That's why the current Fed hikes are conservative - a lot of people are claiming that they are late, and should've done it earlier, but i think they are doing it right. Slow and steady, and be conservative.