Are We Sure We Want Lower Rates? — James Derrick

American consumers want cheaper debt to help them afford expensive homes, cars, and lifestyles. The drumbeat is constant, from Wall Street to cable news. It seems everyone wants lower rates. But let’s pause to ask, “Are we sure lower rates will help?”

Interest rates move with inflation, and inflation has been stubborn. We see it at the gas pump and on our grocery receipts, when we book flights and when we eat out. Inflation was already drifting higher before the conflict with Iran pushed oil prices up.

Oil is the bloodstream of a modern economy. Old playbook: Oil up, inflation up, rates up, economy down. For decades, higher oil prices drained money from American consumers and businesses, slowing economic growth. Yet this has not been the story of 2026. The U.S. economic heart is still beating despite inflation. Why? We have rewritten the playbook.

New playbook: Higher oil prices still mean higher inflation, but they do not necessarily mean the entire economy is slowing. America is a major energy producer again. Fears that the world would run out of oil sparked innovation. That has led to the United States becoming the largest energy producer in the world, pumping roughly 13 million barrels of crude oil per day, just under 13% of worldwide demand.

The Federal Reserve is tasked with maintaining stable prices, which it defines as a 2% inflation rate. The Fed has missed this target for six straight years. Seventy-two consecutive months above target. Zero wins.

Here is the part most people miss. The rates that matter most to households, including mortgages and auto loans, are not controlled by the Fed. While the Fed sets overnight rates, longer-term borrowing costs are heavily influenced by Treasury yields. The Fed has been lowering its rate, yet many consumer borrowing rates have remained elevated. Why? Because investors ultimately demand compensation for inflation.

Bond investors want to beat inflation, plus a little extra. No press conference and no rate cut can override that arithmetic. The next time you think: “We need lower interest rates,” translate it to: “We need lower inflation.”

If inflation remains stubborn, cash and fixed income will struggle to keep pace. One of the best defenses against inflation is to be an asset owner with the potential to ride the wave of inflation. Planning is also critical, especially for retirement.