As per a report by a foundation established by billionaire Peter G. Peterson, the US government’s interest payments are expected to exceed half a trillion dollars this year due to the increasing interest rates.

The report reveals that the total payments made by the government this year will be $6.4 trillion, which is $81 billion more than last year’s federal outlays.

Surge in payments’ effects

The increase in payments can be mostly attributed to the Federal Reserve’s frequent interest rate hikes in the past year. Before the recent break, the Fed had implemented ten consecutive rate hikes in just 14 months, causing its benchmark interest rate to reach 5.08%, a level not seen since 2007.

As a result, the Peterson Foundation estimates that the US government will spend an additional $187 billion this year solely to pay off the interest on its mounting debt.

“The government’s interest payment on federal debt, which is primarily driven by the size of the debt held by the public and recent interest rates, is projected to total $663 billion (2.5% of GDP) in 2023, a 39% increase from the $476 billion recorded for last year.”

The notes continued and stated this:

“Much of the growth in interest costs is driven by higher interest rates, which have been raised 10 times since early 2022 by the Federal Reserve in response to high inflation.”

Banking regulator drops important news

Acting Comptroller of the Currency Michael J. Hsu just issued a fresh warning about potential risks to the US banking system.

In a new statement from the Office of the Comptroller of the Currency (OCC), Hsu says that banks should be “on the balls of their feet” with regard to risk management as credit markets begin to weaken.

Hsu said the following:

“This means banks should be:

guarding against a false sense of comfort from the recent relative stability in bank markets and from the benign credit performance data over the course of the pandemic, re-evaluating exposures, especially asset and liability concentrations, across a range of scenarios, taking actions to preserve capital and maintain strong liquidity consistent with each bank’s risk profile,
maintaining discipline and strong risk management across all risk areas, not just in response to headlines, and
preparing to communicate clearly, credibly, and promptly about their condition and risk profile should questions arise from customers, investors, depositors, and other stakeholders.”

Stay tuned for more interesting financial news.

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