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Home/Markets & Investing/FED INTEREST RATE DECISION · DOL FIDUCIARY RULE ERISA

The US Dollar's Reserve Status Grants the US Government the Power to Borrow at Low Rates

AC

Amara Callahan

Fed interest rate decision · Apr 14, 2026

The US Dollar's Reserve Status Grants the US Government the Power to Borrow at Low Rates

Source: DojiDoji Data Terminal

Indian stock prices fall when the US Federal Reserve raises interest rates. This systematic chain reaction is triggered by institutional investors—mutual funds, pension funds, and sovereign wealth funds—who benchmark their asset allocation models against the risk-free rate. When US Treasury bond yields rise, these institutions shift capital from equities into bonds, selling stocks in emerging markets to fund the purchase of higher-yielding US debt.

Related Brief17h ago
commodity markets

Energy Price Spikes Erase Interest Rate Cut Expectations for Gold Holders

Spot gold fell to $4,694.30 per ounce, its lowest level since April 7. The decline follows a shift in interest rate expectations that has eroded the demand for the non-yielding metal. Traders now see little chance of a Federal Reserve interest rate cut this year, a reversal from the previous expectation of two cuts. This shift stems from oil prices jumping above $100 a barrel and a surge in natural gas prices. These energy price spikes followed the failure of US-Iran peace talks in Islamabad and the US military's announcement of a blockade of the Strait of Hormuz, a maritime chokepoint through which approximately 21% of globally traded petroleum passes annually. The resulting inflation concerns limit the scope for monetary easing and increase the opportunity cost of holding gold. Spot gold has fallen more than 11% since the US-Israeli war on Iran began on February 28.

The interest rate on US Treasury bonds serves as the global risk-free rate. The US government issues these bonds to cover a fiscal deficit of 6% of GDP. The US can maintain this deficit without market punishment because the US Dollar is the world's reserve currency, which guarantees a global demand for US debt. This allows the US government to borrow whenever it wants at low interest rates.

Related Brief21h ago
commodities

Higher inflation is crushing gold because the Fed isn’t cutting rates — it might hike again

Spot gold is trading near $1,950 per ounce, down 3.8% and breaking key support at $1,980, as rising real yields and a surging dollar overwhelm its traditional role as an inflation hedge. Recent CPI and PPI reports exceeded forecasts, reinforcing the view that inflation is not cooling as hoped. That data has shifted market expectations: the Federal Reserve is no longer expected to cut rates soon. Instead, traders now price in the possibility of another hike. The 10-year Treasury yield has climbed to 4.5%. As nominal yields rise faster than inflation expectations, real yields — the return on inflation-protected debt — are increasing. That makes Treasury securities more attractive than gold, which pays no yield. At the same time, hawkish Fed sentiment is fueling demand for the US dollar. The DXY index gained 1.2%, reaching a two-month high. Since gold is priced in dollars, a stronger greenback makes it costlier for foreign buyers, dampening demand. While central bank purchases and geopolitical risks offer some floor, they’re not enough to offset the pressure from higher real yields and dollar strength. Gold’s fate now hinges on whether inflation shows clear signs of sustainably receding — or if the Fed’s next move is up, not down.

Because the US borrows in its own currency, it possesses what economists call the "exorbitant privilege."

Related Brief5h ago
foreign exchange

US Dollar Resurgence Driven by Inflation Spike and Hormuz Blockade

Global currencies are weakening against the US Dollar as market demand for the greenback surges. This resurgence is driven by a combination of a March CPI spike and a blockade of the Strait of Hormuz. The increased demand for the US Dollar has led to an increase in its value, resulting in the other global currencies weakening against the US Dollar.

Fed interest rate decisionDOL fiduciary rule ERISA

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