Interest costs on US public debt have reached record levels this fiscal year, driven by higher interest rates and a growing debt burden.
The US Treasury reported that gross interest on Treasury debt securities totaled $1.267 trillion in the first 11 months of fiscal 2026 through August, compared to approximately $1.124 trillion during the same period in fiscal 2025—an increase of about $139 billion or 12%.
August alone saw $97.769 billion in gross interest outlays, averaging more than $3.15 billion daily.
With one month remaining in the fiscal year, the current run rate suggests total interest payments will exceed $1.3 trillion for a full year for the first time. Interest expenses now represent approximately 26% of total US government receipts.
This marks the sixth consecutive annual increase in interest costs, totaling $784 billion over that period, or a 162% cumulative increase.
Total public debt stood near $40.200 trillion at the end of August. As older debt issued at lower interest rates matures and rolls into higher-rate securities, interest has become one of the largest federal budget line items.
Markets are currently pricing in a 53% probability that the Federal Reserve will raise interest rates again in October, a shift from expectations a year ago when analysts were forecasting three rate cuts by October 2026.
