The Federal Reserve’s decision to cut interest rates last week made headlines. But for households and businesses, it doesn’t mean borrowing is getting cheaper anytime soon.

Mortgage rates remain stubbornly high. Small businesses are paying more for loans. Taxpayers are smarting due to Washington’s fiscal mismanagement. Interest rates now carry something extra: a “policy dysfunction surcharge.”

Reckless spending during and after the pandemic, along with an overly accommodative Fed, produced the worst inflation since the 1970s. Now, political pressure and executive meddling risk pushing the central bank toward an even looser stance, just when credibility matters most. Investors see the risks and are demanding more compensation to lend. The result: long-term interest rates well above where inflation expectations suggest they should be. That gap costs the U.S. economy about $160 billion a year.........

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