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Fed Chair Jerome Powell says the US is on an unsustainable financial path and that debt is outpacing economic growth.
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In a January 4 interview with 60 Minutes, Jerome Powell said the debate among elected officials about reducing debt levels is “over” and that:
“In the long run, the United States is on an unsustainable fiscal path. The federal government is also on an unsustainable fiscal path, and that means that debt is growing faster than economic growth.”
Powell emphasizes that the US economy needs to be more reliable before the Fed can cut interest rates. He noted that Bitcoin prices fell last week after the Fed left interest rates unchanged and confidence grew that inflationary pressures were easing. Powell continued:
“I apologize for dashing hopes for a rate cut in March. But we need more confidence in economic strength before taking this step.”
The Fed Chair Jerome Powell believes that inflation will continue to fall in the first half of this year and that they will review their strategy at the March Federal Open Market Committee meeting. However, Powell says they want more confidence before cutting rates and that they want to see good economic evidence before making that decision.
Powell says rate cuts could trigger a rally in markets like risky assets and growth-focused technology companies, and that the move could boost overall spending activity and risk appetite. However, he adds that a majority of the Fed board believes there will be a rate cut this year.
Powell says factors such as weakness in the labor market or a decline in inflation could prompt them to take an early step to cut rates. Therefore, he emphasizes that they are ready to review the Fed‘s strategy and are closely monitoring the economic situation.