Weak Fed Leadership and the Policy Interest Rate Trap

Nikolay Stoykov, Managing Partner at Alaric Securities on “Business Start”, BloombergTV Bulgaria

On “Business Start” with Hristo Nikolov on BloombergTV Bulgaria, Nikolay Stoykov, Managing Partner at Alaric Securities, sharply criticized the policy interest rate approach of the U.S. Federal Reserve. According to Stoykov, weak leadership and delayed interest rate decisions are contributing to economic uncertainty, driving up national debt costs, and eroding global investor confidence.

Fed Leadership and the Policy Interest Rate Problem

Stoykov did not mince words regarding Fed Chair Jerome Powell, calling him unprepared and ineffective in managing the central bank’s responsibilities. “He is not leading the process and is not effectively fighting inflation,” Stoykov said. He argued that by postponing necessary cuts to the policy interest rate, the Fed is costing American taxpayers an estimated $350 to $500 billion in 2025.

A Misaligned Policy Interest Rate and Its Broader Effects

“The issue is not just where the interest rates are,” Stoykov said, “but what inflation expectations are.” With 30-year U.S. Treasury bond yields at 2.5–3%, he believes this level is unsustainable given the country’s enormous debt load. A proactive policy interest rate policy could have helped prevent the downgrade of the U.S. credit rating by Moody’s — a move Stoykov attributes directly to Powell’s slow response.

Global Bond Markets: Why Switzerland Stands Apart

While most countries are experiencing rising long-term bond yields, Switzerland is a notable exception. Stoykov emphasized that this divergence highlights deeper uncertainty about global economic growth. “We also see weak leadership in monetary policy across major economies,” he added.

Europe’s Policy Shift: Why German Bonds May Gain Attention

Discussing Europe, Stoykov pointed to Germany’s goal of increasing military spending, which complicates financing conditions. “This makes Germany a poor proxy for broader European trends,” he said. Although German bonds could theoretically become more attractive than U.S. bonds, Stoykov isn’t betting on it.

The Temporary Nature of Market Panic

Despite current turbulence, Stoykov remains optimistic. “It’s only a matter of time before investors regain their confidence in the U.S.,” he concluded. He believes the high policy interest rate is a short-term overreaction and expects a shift once the Fed realigns its strategy.

See the full commentary in the video.