{ "id": 67464, "date": "2026-04-02T09:50:53", "date_gmt": "2026-04-02T02:50:53", "guid": { "rendered": "https:\/\/hbbgroup.net\/should-us-interest-rates-be-even-higher-this-rule-says-yes\/" }, "modified": "2026-04-02T09:50:53", "modified_gmt": "2026-04-02T02:50:53", "slug": "should-us-interest-rates-be-even-higher-this-rule-says-yes", "status": "publish", "type": "post", "link": "https:\/\/hbbgroup.net\/en_us\/should-us-interest-rates-be-even-higher-this-rule-says-yes\/", "title": { "rendered": "Should US interest rates be even higher? This rule says yes" }, "content": { "rendered": "
\n

A simple rule<\/strong> suggests US interest rates<\/a> should be higher than they are today. Yet the Federal Reserve<\/a> is standing still. That gap between theory and reality is becoming one of the more interesting tensions<\/strong> in global markets and one that could shape the next move in the US Dollar.\u00a0<\/p>\n

The Taylor Rule: Built for moments like this<\/h2>\n

The Taylor Rule<\/strong> is one of the most widely known guides to monetary policy. At its core, it is straightforward<\/strong>:<\/p>\n

When inflation runs above target and the economy is strong, interest rates should be higher. When inflation is low and growth weakens, rates should fall.<\/p>\n

It offers a clean, intuitive benchmark<\/strong> for where policy should be, based on the state of the economy.\u00a0<\/p>\n

What the rule tells us about current policy<\/h2>\n

By most standard inputs, the message is clear<\/strong>.<\/p>\n

Inflation in the United States (US) remains above the Fed\u2019s 2% target, while growth and the labour market continue to show resilience. That combination typically points to a policy rate that is higher than current levels<\/strong> of 3.50%-3.75%.<\/p>\n

\n

<\/p>\n<\/div>\n

In other words, the rule is not calling for patience. It is calling for restraint to be maintained, or even tightened further<\/strong>.<\/p>\n

So, why is the Fed not moving?<\/p>\n

This is where things start to get a bit more nuanced<\/strong>.\u00a0<\/p>\n

The Fed is not ignoring the data, far from it, but it is clearly putting more weight on uncertainty<\/strong>. That said, Fed officials are mindful of the lagged effects of past tightening, the potential drag from global risks, and the still evolving impact of trade tensions and geopolitics.<\/p>\n

There is also a growing sense that rigidly sticking to a rule does not quite fit the current environment<\/strong>. Shocks are less predictable, and the way they feed through the economy is more complex than in the past.<\/p>\n

So, in a way, the Fed is choosing flexibility over formula<\/strong>.\u00a0<\/p>\n

FX implications: The Dollar sits in the middle<\/h2>\n

For FX markets, this gap really matters.<\/p>\n

If the Fed were following something like the Taylor Rule more closely, the message would be straightforward:<\/strong> higher rates, wider differentials, and a stronger US Dollar.<\/p>\n

But that is not quite what is happening. By holding back, the Fed creates a more balanced<\/strong> setup. The Dollar still finds support from relatively high yields, but that support is not unlimited, as markets continue to question how far policy will actually go.<\/p>\n

\n

<\/p>\n<\/div>\n

In other words, the Dollar is no longer trading off just models; it is trading off how willing the Fed is to deviate<\/strong> from them.\u00a0<\/p>\n

What to watch next<\/h2>\n

The key question now is whether the gap between the rule and the current Fed stance starts to close or widens.<\/p>\n

If inflation picks up again or activity remains strong, expectations could shift back towards a more rule-based outcome, which would likely support the Dollar.<\/p>\n

On the flip side, if growth starts to cool or inflation shows clearer signs of easing, that would validate the Fed\u2019s cautious approach and could put a lid on further USD upside.<\/p>\n

\n
\n

<\/p>\n<\/div>

US Dollar Index daily chart<\/figcaption><\/figure>\n

Bottom line<\/h2>\n

The Taylor Rule still offers a useful lens, but it is no longer a roadmap<\/strong>.\u00a0<\/p>\n

Right now, the real story is not where the rule points but why the Fed is choosing not to follow it<\/strong>, and that tension is likely to remain a key driver for the US Dollar in the weeks ahead.<\/p>\n<\/div>", "protected": false }, "excerpt": { "rendered": "

A simple rule suggests US interest rates should be higher than they are today. Yet the Federal Reserve is standing […]<\/p>", "protected": false }, "author": 5, "featured_media": 67465, "comment_status": "open", "ping_status": "open", "sticky": false, "template": "", "format": "standard", "meta": { "_acf_changed": false, "footnotes": "" }, "categories": [ 222 ], "tags": [], "class_list": [ "post-67464", "post", "type-post", "status-publish", "format-standard", "has-post-thumbnail", "hentry", "category-ngoai-hoi" ], "acf": [], "_links": { "self": [ { "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/posts\/67464", "targetHints": { "allow": [ "GET" ] } } ], "collection": [ { "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/posts" } ], "about": [ { "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/types\/post" } ], "author": [ { "embeddable": true, "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/users\/5" } ], "replies": [ { "embeddable": true, "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/comments?post=67464" } ], "version-history": [ { "count": 0, "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/posts\/67464\/revisions" } ], "wp:featuredmedia": [ { "embeddable": true, "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/media\/67465" } ], "wp:attachment": [ { "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/media?parent=67464" } ], "wp:term": [ { "taxonomy": "category", "embeddable": true, "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/categories?post=67464" }, { "taxonomy": "post_tag", "embeddable": true, "href": "https:\/\/hbbgroup.net\/en_us\/wp-json\/wp\/v2\/tags?post=67464" } ], "curies": [ { "name": "wp", "href": "https:\/\/api.w.org\/{rel}", "templated": true } ] } }