Federal Reserve Chair Jerome Powell said “the U.S. is on an unsustainable fiscal path” in an 60 Minutes interview with Scott Pelley released Sunday.
“The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial,” Powell said when asked if the national debt is a danger to the economy.
The U.S. national debt topped $34 trillion for the first time ever in early January, just over three months after surpassing the $33 trillion mark, according to data released by the U.S. Treasury.
Congress has punted on spending deadlines three times since the end of September as it grapples with how to fund the government amid tensions about the ballooning national debt.
Under the latest stopgap measure passed in January, funding for four federal agencies will expire on March 1. Funding for the rest of the government is set to run out on March 8.
President Biden and House Republicans faced off on the borrowing limit last spring, ultimately averting disaster days before the U.S. was set to default. But Fitch Ratings downgraded the U.S. credit rating from “AAA” to “AA+” in August, citing the increasing burden of the national debt and repeated partisan standoffs over the debt limit.
Despite the Fed chair’s long-term worries about the national debt, he said members of the central bank’s rate-setting panel believe “the economy’s in a good place.”
The economy has been growing quickly, clocking in at an annual rate of 3.3 percent during the fourth quarter of 2023, according to the latest data released by the Commerce Department’s Bureau of Economic Analysis.
Inflation has also fallen drastically from its 9 percent peak in summer 2022 to 3.4 percent in December, according to the latest consumer price index (CPI). The Fed hiked interest rates from near zero in March 2022 to a range of 5.25 to 5.5 percent in June 2023, and have held rates steady at subsequent meetings.
Top Fed officials have signaled rate cuts on the horizon in 2024, but declined to cut rates following the January meeting last Wednesday, as expected. What was less expected was Powell’s suggestion that March rate cuts were off the table at a press conference following the announcement, a position he doubled down on during his 60 Minutes interview.
“I would say, and I did say yesterday, that I think 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.
“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.
Powell and the Fed have taken heat from both sides of the political spectrum over their decision to keep interest rates at their highest level in more than two decades.
Former President Trump accused Powell of being “political” and suggested the Republican appointee would cut rates to help Democrats during the upcoming election during a Fox Business interview on “Mornings with Maria” that aired Sunday.
Some Senate Democrats also urged the Fed chair to cut rates ahead of last Wednesday’s meeting.
“As the Fed weighs its next steps in the new year, we urge you to consider the effects of your interest rate decisions on the housing market and to reverse the troubling rate hikes that have put affordable housing out of reach for too many,” Sens. Elizabeth Warren (D-Mass.), John Hickenlooper (D-Colo.), Jacky Rosen (D-Nev.) and Sheldon Whitehouse (D-R.I.) wrote in a letter to Powell last Sunday.
But Powell pushed back on any implication that politics would play a role in the Fed’s decision to cut interest rates in the coming months.
“We do not consider politics in our decisions. We never do. And we never will,” Powell said. “Integrity is priceless. And at the end, that’s all you have.”
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