U.S. Paying More to Borrow as Fed Raises Rates, Inflation Stays Elevated

Yields on U.S. Treasurys are rising as the Federal Reserve lifts interest rates to try to cool inflation, a development that could increase the federal government’s borrowing costs over time to levels higher than currently projected.

Government spending on net interest costs in the fiscal year that began last October totaled about $311 billion through May, a nearly 30% increase from the same period a year earlier, according to Treasury Department data. While the annual federal deficit has narrowed 79% this fiscal year, the higher borrowing costs are a rising government expenditure at a time when other federal spending is declining and tax revenue is increasing.