Fed’s Powell says US on ‘unsustainable fiscal path’ as debt burden grows
Federal Reserve Chair Jerome Powell is warning the United States is on an “unsustainable fiscal path," with debt currently outpacing growth in the broader economy.
Speaking in a Jan. 4 interview with 60 Minutes, Powell said it’s now “past time” for elected U.S. officials to start having an “adult discussion” about reducing the level of debt in the economy.
“In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government's on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy,” Powell said.
The price of Bitcoin (BTC) stumbled late last week when the Fed left interest rates at 5.25%–5.50% and the central bank dashed hopes of any rate cuts in March, saying that it would need “greater confidence” that inflationary pressures had been dealt with before doing so.
Powell reiterated this during the interview, saying that the Fed was still waiting for “good” evidence of economic strength before it could consider cutting rates.
“It’s not likely that this committee will reach that level of confidence in time for the March meeting, which is in seven weeks,” Powell said, adding that “almost all” members of the Federal Reserve board believe that cuts will occur sometime this year.
“We just want some more confidence before we take that very important step of beginning to cut interest rates.”
Rate cuts are considered bullish for risk assets such as cryptocurrencies and growth-oriented tech companies such as Apple, Nvidia and other large tech stocks.
Related: Bitcoin ETFs hype stalled by due diligence — Bloomberg
When the Federal Reserve cuts rates, it makes it cheaper to borrow capital, which typically increases overall spending activity and risk appetite in the wider economy
Powell said he believed inflation would continue to fall during the first half of this year and that the central bank would revisit its strategy at the next Federal Open Market Committee meeting in March.
“The kinds of things that would make us want to move sooner would be if we saw weakness in the labor market or if we saw inflation really persuasively coming down,” he added.
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