Published: Fri, November 15, 2019
Markets | By Otis Pena

Fed's Powell Tells Congress Federal Debt Is 'Unsustainable'

Fed's Powell Tells Congress Federal Debt Is 'Unsustainable'

Mr Powell said the Fed expected some easing in the pace of job gains after last year's strong pace.

"The baseline outlook remains favorable", Powell said in remarks prepared for delivery to the Joint Economic Committee of Congress, a panel that includes some members from the House of Representatives and Senate.

"We're paying actually high interest".

For now, in testimony before a congressional panel, Powell expressed optimism about the U.S. economy, saying that he expects it to grow at a solid pace, although it still faces risks from slower growth overseas and trade tensions.

Powell over the course of a 90-minute hearing before the Joint Economic Committee dodged several efforts to pull him into pre-election-year politics, alternately saying that the Fed's job was not to set trade, immigration or federal spending policies, weigh in on Democratic candidates' wealth tax and other proposals, or dole out credit for the USA economy's record-setting expansion, now in its 11 year.

However, he cautioned that challenges such as low inflation and weakness overseas remain.

Fed officials have cut their short-term rate three times since July, most recently in October to its current range between 1.5% and 1.75%.

Mr. Yarmuth said Thursday he supported the principle that the Fed should have greater independence in setting policy, and he called Mr. Trump's repeated attacks of the Fed "unacceptable and unsafe". "Remember trade policy uncertainty itself is a separate channel through which Trade does affect the economy". But he said the Fed is monitoring "very carefully" to see if the tariff impact spills over to affect consumers.

"Central banks around the world are going to have less room to cut in this new normal of low rates and low inflation", he said.

During the hearing, Powell restated his position that negative interest rates would not be appropriate for the USA economy.

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He also flagged his concerns about an "unsustainable" government budget and "high and rising debt", which could limit policymakers' ability to boost spending as needed in an economic downturn.

"Even if you got some data that surprised in this environment, you might make the argument we have been preemptive already", he said, signaling a high bar for another cut.

Powell told lawmakers that politics played no role whatsoever in the Fed's policy decisions, which were based on the analysis of the data.

Traders are looking for clarity on the status of U.S.

United States economic data has continued to show strength among households, and financial conditions have eased with stocks touching record highs on Wall Street this month.

Manufacturing and business investment continue to lag.

"The outlook is still a positive one".

Noting that "policy is not on a preset course", Powell said the Fed would respond accordingly "if developments emerge that cause a material reassessment of our outlook".

Despite those risks, the Fed chief expressed optimism about the state of the US economy, which is in the 11th year of a record-long expansion.

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