Federal Reserve Chairman Jerome Powell has issued a stark warning that the United States is treading an “unsustainable fiscal path” due to its debt growing more rapidly than the economy.
In an interview aired on January 4th with “60 Minutes,” Powell emphasized the urgency for U.S. leaders to engage in serious conversations about diminishing the nation’s debt. “The U.S. federal government is on an unsustainable fiscal path, meaning the debt is expanding quicker than the economy,” Powell stated, underscoring the critical need for action.
This warning came as Bitcoin’s value hit following the Federal Reserve’s decision to maintain interest rates between 5.25% and 5.50%. The Fed also tempered expectations for a rate cut in March, stating a need for “greater confidence” that inflation pressures were under control.
Powell elaborated that the Federal Reserve seeks solid evidence of economic resilience before contemplating rate reductions. “Given the current outlook, it’s improbable that we’ll have sufficient assurance by the March meeting,” he noted. However, he projected potential rate cuts within the year, contingent on improved economic indicators.
Rate reductions generally stimulate risk asset investments, including cryptocurrencies and tech stocks, by making borrowing more affordable and potentially boosting economic spending and risk-taking.
Looking ahead, Powell anticipated a decrease in inflation during the year’s first half, with the Federal Reserve set to re-evaluate its approach at the March meeting of the Federal Open Market Committee. He mentioned that indicators such as labor market stability and a definitive decline in inflation could hasten the decision to lower interest rates.
