10 Ways to Explain Why Interest Rates Are So High

It cannot have been easy for Kevin Warsh to come out for raising interest rates.The man who appointed him chairman of the Federal Reserve this year, President Trump, has been vocal in saying he thinks rates should be much lower.

But with inflation persistently above target and bond investors restless, Warsh didn’t have a choice.The rate-setting Federal Open Market Committee, which Warsh heads, voted unanimously on Wednesday to raise the central bank’s key short-term lending rate.The yield on 10-year Treasury notes hit 5 percent before the Fed vote, the highest level since 2007, and has stayed around that level since, keeping borrowing costs high for home buyers and others.It’s not clear how much raising short-term interest rates will pull down long-term rates.That’s because there are too many explanations floating around for why bond yields have risen so much.

If you can’t pin down why something’s happening, you don’t have much hope of fixing it.Economists would say the rise in yields is “overdetermined.”Here are 10 explanations from politicians, economists and others.

Some of these would be mitigated by Fed rate increases, and some that would require something that changes in interest rates can’t supply.Strong economyThe unemployment rate in August was just 4.1 percent, well below the 50-year average of 5.7 percent.A strong economy usually makes rates go up.

But that’s not how Trump sees it.After the Fed vote, he wrote Wednesday on Truth Social that interest rates should be 1 percent or less because the U.S.

economy is strong, with “booming investment.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe....