- When does the U.S. government pay interest to the Fed, where does that money go?

The interest that the U.S. government pays to the Fed (through treasury bonds and bills) becomes revenue for the Fed. After deducting operational costs and a small portion of dividends (up to 6%) for member banks, most of the profits will be transferred back to the U.S. Department of the Treasury by the Fed. This money can then be used to fund the budget, public spending, or reduce debt. No individual at the Fed, including the Chairman like Jerome Powell, receives this interest.

- So is the interest rate important?

Yes. Because the total public debt of the U.S. is currently estimated at around $36.9 trillion, of which the Fed holds about $4.6 trillion (~12.5%), and other government agencies hold about $7.5 trillion. Thus, only about 20% of the debt is 'self-borrowed' by the U.S. government, while the remaining 80% belongs to the public, including individual investors, financial institutions, insurance companies, and even other countries.

With that debt, the government must pay interest as promised, so if interest rates are high, the burden of debt repayment will also increase significantly. Therefore, the Fed's interest rate policy directly affects the cost of national borrowing.