Bank of America’s analysis quantifies the fiscal impact of elevated interest rates: each 100 basis points of Fed rate increases adds $95 billion annually to the Treasury’s interest payments. The Congressional Budget Office (CBO) projects that a 1.5% rate increase above forecasts would result in $4.9 trillion in additional net interest costs over the next decade, with deficits growing by $6 trillion. The Treasury has already exceeded $2 trillion in debt service payments for fiscal year 2026 on a national debt of $40 trillion. Mark Zandi, chief economist at Moody’s, warns of a vicious cycle where rising rates increase the interest burden, which in turn pushes rates even higher.
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