U.S. inflation sits at 3.2%, above the Fed's 2% target, yet the Fed is signaling rate cuts anyway. The reason: annual interest on federal debt is nearing $1 trillion, so raising rates further would destabilize Treasury finances. This marks a structural shift toward gradual dollar erosion.
Inflation is at 3.2% and the target is 2%, and the Fed is cutting rates anyway. And here's why that matters. The interest expense on federal debt is approaching $1 trillion per year. The Fed cannot raise rates without blowing up the Treasury's debt math. So the Fed is signaling rate cuts despite inflation still running above its stated goal. That is not a policy error. That is a regime change. In that regime, the dollar's purchasing power is being sacrificed slowly and structurally.
