Powell: The United States is on an unsustainable financial path

Federal Reserve Chairman Jerome Powell said that “the United States is on an unsustainable fiscal path” in an interview with “60 Minutes” with Scott Pelley released Sunday.

“The US federal government is on an unsustainable fiscal path. That means the debt is growing faster than the economy. Therefore, it is not sustainable. I don't think that's controversial,” Powell said in response to a question about whether the national debt poses a risk to the economy. “Launching.”

The US national debt surpassed $34 trillion for the first time ever in early January, just over three months after surpassing the $33 trillion mark, according to data from the US Treasury Department.

Congress has hit spending deadlines three times since the end of September as it grapples with how to fund the government amid tensions over the ballooning national debt.

Under the latest temporary measure passed in January, funding for four federal agencies will end on March 1. Funding for the rest of the government is set to run out on March 8.

President Biden and House Republicans confronted the borrowing limit issue last spring, ultimately averting disaster days before the United States defaulted. But Fitch Ratings downgraded the US credit rating from 'AAA' to 'AA+' in August, citing the growing burden of the national debt and frequent partisan showdowns over the debt limit.

Despite the Fed chairman's long-term concerns about the national debt, he said members of the central bank's interest rate-setting committee believe “the economy is in good shape.”

The economy is growing rapidly, recording an annual rate of 3.3 percent during the fourth quarter of 2023, according to the latest data from the Department of Commerce's Bureau of Economic Analysis.

Inflation also fell significantly from its peak of 9% in the summer of 2022 to 3.4% in December, according to the latest Consumer Price Index. The Fed raised interest rates from near zero in March 2022 to a range of 5.25 to 5.5 percent in June 2023, and kept interest rates steady at subsequent meetings.

Senior Fed officials signaled interest rate cuts on the horizon in 2024, but declined to cut rates after the January meeting last Wednesday, as had been expected. What wasn't expected was Powell's suggestion that March rate cuts were off the table in a news conference following the announcement, a position he reiterated during his “60 Minutes” interview.

“I would say, and I said yesterday, that I think it is unlikely that this committee will reach that level of confidence in time for the March meeting, which will be held in seven weeks,” Powell said.

“The things that might make us want to act sooner would be if we see weakness in the labor market or if we see inflation coming down convincingly,” he added.

Powell and the Fed have been criticized from both sides of the political spectrum for their decision to keep interest rates at their highest levels in more than two decades.

Former President Trump accused Powell of being a “politician” and suggested the Republican appointee could lower interest rates to help Democrats during the upcoming election during an interview with Fox Business on “Mornings with Maria” that aired Sunday.

Some Senate Democrats also urged the Fed chairman to cut interest rates before last Wednesday's meeting.

“As the Fed considers its next steps in the new year, we urge you to consider the impacts of interest rate decisions on the housing market and reverse the alarming interest rate increases that have put affordable housing out of reach for many.” . . Elizabeth Warren (D-Mass.), John Hickenlooper (D-Colorado), Jacky Rosen (D-Nevada), and Sheldon Whitehouse (D-Colorado) wrote a letter to Powell last Sunday.

But Powell rejected any suggestion that politics would play a role in the Fed's decision to cut interest rates in the coming months.

“We don't consider politics in our decisions. We never do. We never will,” Powell said. “Integrity is priceless. In the end, that's all you have.”