Former Fed official on interest rate hikes: Debt service is ‘the real problem’

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Fed’s ‘real problem’ is increased cost of debt service: Former Vice Chair Quarles

Former Federal Reserve Vice Chair Randal Quarles expects the federal government to see financial disruption over the increased cost of debt service.

On "Cavuto: Coast to Coast" Friday, former Federal Reserve Vice Chair Randal Quarles argued the Fed has the tools to tackle inflation, but the federal government could face consequences from the increased cost of debt service.

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RANDAL QUARLES: I do think that what is necessary to address inflation, while it's not as dramatic as some have thought might be necessary, is still going to have a very consequential effect on the costs of debt service throughout the economy, and particularly for the federal government. My mantra as this whole cycle has been going on is that inflation, ultimately, is not really going to be the problem because the Fed will get on top of inflation. They were a little slow to begin, but they have the tools for this type of inflation and they will do it.

The Fed’s “real problem” is how to handle the increased cost of debt service, former Vice Chair Randal Quarles said on “Cavuto: Coast to Coast” Friday, July 1, 2022. (Getty Images)

The real problem is going to be the increase in the cost of debt service, particularly for the federal government, particularly for some of the financial disruption that could cause, because people have grown so used to low interest rates for such a long period of time in managing inflation.

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Former Fed vice chair: Inflation ‘policy is working’

Former Federal Reserve Vice Chair Randal Quarles argues that the Fed’s rate hikes will have a greater slowing effect on inflation than they’re modeling.

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