February 28, 2024

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Fed's Powell: “It is urgent” for the United States to focus on debt sustainability

Fed's Powell: “It is urgent” for the United States to focus on debt sustainability

Powell's comments, which included warnings that the Fed shouldn't tell Congress what to do (“That's none of our business”), come at a time when lawmakers are debating the possibility of creating a fiscal commission to study spending.

Debt has now come into greater focus because the Federal Reserve's aggressive campaign to raise borrowing costs to kill inflation has led to increased interest payments to the government. Although the United States is still able to comfortably finance its public debt, which exceeds $27 trillion, increased spending on benefits and interest may increase in the coming decades, which would put pressure on Washington to act early to rein in the annual deficit. .

“I think you're starting to hear now from people in the elected branches who can make it happen,” Powell said.

The central bank governor also confirmed that the Fed is likely to cut borrowing costs this year, but said its next meeting in March may be too early for such a move. He said the Fed wants to see inflation data continue to decline, as has happened over the past six months.

“We just want to see more good data along those lines,” he said. “It doesn't have to be better than what we saw, or even as good. It just has to be good. And so, we expect to see that. That's why almost everyone in… [Fed’s rate-setting committee] “He believes it will be appropriate for us to lower interest rates this year.”