Fed’s Powell urges Congress to focus on debt, deficit, Latest Business News - The New Paper

Fed’s Powell urges Congress to focus on debt, deficit

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WASHINGTON : Federal Reserve chief Jerome Powell urged Congress on Wednesday to take action on the rising US debt and deficit to ensure the continued growth of the economy.

Called before the Joint Economic Committee to discuss the economic outlook, the central bank chief stressed that it was not his role to give policy advice, before he gave diplomatically-worded policy advice.

"The debt is growing faster than the economy. It's as simple as that," Mr Powell said.

"We're not in the business of advising you when or how to do it but it is inevitable that over time, we have to do it," or the tax dollars of future generations will be used to pay interest rather than for education, security and health.

The US budget deficit - which Mr Powell called "unsustainable" - soared to just under US$1 trillion(S$1.36 trillion) in the 2019 fiscal year, despite a growing economy and low interest rates.

Meanwhile, government borrowing is more than US$23 trillion and growing, and interest payments jumped 10 per cent to US$572.8 billion in the year ended Sept 30.

Mr Powell warned that the debt and deficit could limit the willingness of lawmakers to act in another downturn.

He said the Fed's tools to respond to the next recession are limited. In past recessions, the Fed has cut the key lending rate by five full percentage points on average - but that is no longer possible since the rate has been cut back to a range of 1.5 to 1.75 per cent. - AFP