With breaking events and decisions hitting the media every day, the feeling of overwhelm can emerge when sorting through headlines alone. When sensationalist takes on factual events are in the mix, the result is even more consumer confusion. One of the hot topics at the forefront of political headlines is a subject that extends far beyond partisan politics: interest rates! Spun with a biased twist, fiscal decision-making can appear to be driven solely by political motives. The truth, however, involves a much wider picture. Today, we are going to break down the partisan sensationalism surrounding interest rate trends and take a closer look at the historical and economic perspectives that inform us what may happen next in the ever-evolving economic sphere.

For the past five years, we have been operating in a post-COVID society. One may pause and ask, “What does a global health crisis have to do with U.S. fiscal policy?” The answer is: more than you might think! During the COVID crisis, it was not just our day-to-day lives that froze. Our economy froze as well. Businesses closed or limited operations due to health and safety risks, and even after restrictions eased, many people were slow to resume their pre-COVID economic activities due to ongoing health concerns and financial constraints following layoffs. This shock to the system left policymakers scrambling to stabilize the economy. Cue stimulus checks, emergency lending programs, and most importantly, near-zero interest rates to encourage borrowing and investment.

For much of 2020 and 2021, the Federal Reserve kept interest rates at historically low levels—essentially 0%—to help businesses and households weather the storm. However, as the economy reopened, demand surged faster than supply chains could keep up, driving inflation to levels not seen in decades. By March 2022, the Fed began a rapid series of rate hikes to combat rising prices, eventually pushing the federal funds rate above 5% by mid-2023, the fastest tightening cycle since the early 1980s. While these hikes succeeded in slowing down inflation, they also raised borrowing costs on everything from mortgages to business loans, cooling growth across many sectors.

Now, with inflation easing and the economy facing new challenges, the pendulum is beginning to swing in the opposite direction. One example of an economic indicator that heavily influences rate decisions is employment. Currently, the U.S. labor market — once incredibly resilient during the early recovery period — is showing signs of strain, with job growth slowing and certain industries pulling back on hiring. Lower employment and slowed business investment often ripple outward, affecting households, consumer spending, and long-term economic growth.

This brings us to the present moment: as of late summer 2025, policymakers are actively weighing whether to begin cutting interest rates as soon as September. The idea behind lowering rates would be to take pressure off businesses and consumers, make credit more affordable, and encourage investment and job creation, thereby re-stimulating economic growth. However, the decision is far from simple. Cutting too quickly could risk reigniting inflation, while waiting too long could deepen economic weakness.

For now, the Federal Reserve and other policymakers remain in the discussion stage. We do not yet know what the final decision will be regarding interest rates, but in the meantime, we can do our best to look at speculative reports through a bigger-picture lens. While political motivations may influence how these decisions are framed in the media, they are not the sole drivers of economic policy. Multiple factors—employment trends, inflation data, global market shifts, and consumer confidence—all play a role in shaping the future of U.S. interest rates.

Sometimes it helps to peel back the layers of sensationalism and take a peek at the oft-overlooked factors that truly make our economy tick.

Did this article catch your interest? Keep an eye out for more as we continue our Breaking Sensationalism series, bringing you bigger picture deep-dives into breaking news. And, if you want to know more about what a potential September rate cut could mean for you as an individual, family, or business owner, watch for our upcoming article, where we’ll walk through the real-world impacts of lower interest rates on everyday economic life.