Federal Reserve Chair Jerome Powell expressed concerns about the mounting national debt in a “60 Minutes” interview with Scott Pelley. Powell stated that the nation’s debt is growing faster than the economy and is therefore on an unsustainable path.
The U.S. national debt reached over $34 trillion for the first time in early January, just over three months after crossing the $33 trillion mark, according to data from the U.S. Treasury.
Since the end of September, Congress has delayed spending deadlines three times while dealing with the challenge of funding the government amidst concerns about the increasing national debt. The most recent stopgap measure was passed in January, setting funding expiration for four federal agencies on March 1 and for the rest of the government on March 8.
Last spring, President Biden and House Republicans were at odds over the borrowing limit, ultimately avoiding a crisis just days before the U.S. was set to default. However, in August, Fitch Ratings downgraded the U.S. credit rating from “AAA” to “AA+,” pointing to the mounting burden of the national debt and repeated partisan standoffs over the debt limit.
Despite Powell’s long-term concerns about the national debt, he mentioned that members of the central bank’s rate-setting panel believe that “the economy’s in a good place.”
Economic growth has been significant, with a 3.3 percent annual rate during the fourth quarter of 2023, according to data released by the Commerce Department’s Bureau of Economic Analysis.
Inflation has also seen a notable drop from its peak of 9 percent in summer 2022 to 3.4 percent in December, as reported by the latest consumer price index (CPI). The Fed had increased interest rates from near zero in March 2022 to a range of 5.25 to 5.5 percent in June 2023, and has maintained steady rates in subsequent meetings.
While top Fed officials have hinted at potential rate cuts in 2024, they refrained from doing so following the January meeting, as anticipated. Powell also indicated during the press conference and in his “60 Minutes” interview that any March rate cuts were unlikely.
Powell stated, “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.”
The Fed and Powell have faced criticism from both sides of the political spectrum for maintaining interest rates at their highest level in over two decades. Former President Trump accused Powell of being “political” and insinuated that the Republican appointee would reduce rates to benefit Democrats during the upcoming election.
Some Senate Democrats urged Powell to cut rates before the recent meeting in January, expressing concerns about the impact of interest rate decisions on the housing market.
Powell firmly rejected any suggestion that politics would influence the Fed’s decision to cut interest rates in the coming months, saying, “We do not consider politics in our decisions. We never do. And we never will. Integrity is priceless. And at the end, that’s all you have.”
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