United States | Public debt is “unsustainable” in the long term, according to Jerome Powell

(New York) The public debt of the United States is “unsustainable” in the long term and it is “high time” to remedy it, said Sunday the president of the Fed, the American Central Bank Jerome Powell, in a long interview on CBS.

“In the long term, the United States finds itself on an unsustainable fiscal path. The American federal government is on an unsustainable fiscal path,” Mr. Powell insisted, supporting his remarks by noting “that the debt is growing faster than the economy.”

“I think we are starting to hear from (elected officials) who can ensure” that the United States returns to a “sustainable” debt position and “that the sooner the better”.

“It’s time we put this in our sights again,” he added. “We can say that it is urgent,” he argued in this interview recorded Thursday.

Regarding the United States’ place in the world, Mr. Powell considered its interaction with other nations to be “extremely beneficial to our country.”

“Since World War II, the United States has been an indispensable nation in aiding and defending democracy, security agreements, economic agreements. (…) It is clear that the world wants this,” he noted. “It benefits our economy so much to have this role.”

At its Monetary Policy Committee (FOMC) meeting last week, the Fed maintained its rates and indicated that it was waiting to have greater confidence in the lasting decline in inflation before initiating monetary easing.

A position reiterated in the show 60 Minutes of CBS, where Mr. Powell again considered it unlikely that a reduction would be decided at the next meeting in March.

“I think it is unlikely that this committee will reach the level of confidence in time for the March meeting,” he stressed.

Regarding the context necessary for a possible drop, “it doesn’t have to be better than what we’ve seen, or even as good. It just has to be good,” he said.

“The moment is approaching (…), based on our forecasts”, he wanted to reassure, specifying that the Fed had to weigh “the risk of moving too early, against the risk of moving too late”.

The American central bank maintained the 1er February its main key rate in the range of 5.25 to 5.50% in which it has been since July, a decision taken unanimously by the 12 voting members of the FOMC.

According to Mr. Powell, the inflation rate should continue to decline in the first half of the year and the Fed should again position itself in March regarding its key rate target, which was set at 4.6% at the end of its meeting of December.

“Nothing has happened in the meantime that would lead me to believe that (committee members) are going to drastically change their forecasts,” noted Mr. Powell.

“The economy is strong. The job market is strong. Inflation is falling. There is no reason why this cannot continue,” he noted. “I really think the economy is in a good place.”

The evolution of PCE prices, a measure favored by the Fed and which it wants to reduce to 2%, showed underlying inflation – excluding energy and food – at the lowest in almost three years, at 2.9% on a year.

Economic growth was much stronger than expected in 2023, even accelerating compared to 2022, to 2.5%.

reference: www.lapresse.ca

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