FED chairman Jerome Powell said yesterday that the Federal Reserve has no choice but to face the growing US debt.
Speaking at The Economic Club of Washington, D.C., and speaking of US indebtedness, Powell said:
“This is a long-lasting problem that we definitely have to face and eventually we will have no choice but to face it.”
The problem is becoming more and more urgent, because the debt is already about 2 trillion. dollars.
Life in a bubble
Powell’s statement, however, had the character of an appeal, not an announcement of the necessary changes. This is also the case of journalists, and the market has also taken it away. Wall Street did not react in any particular way to his words, which is – according to observers of the stock exchange – a bad phenomenon and shows that investors still live in a kind of bubble and do not pay attention to macroeconomic factors.
On the other hand, the fact that Powell is worried about debt is not bad news for the markets. In fact, further interest rate increases are less likely because FED will be afraid of further increasing the US debt balance. This may even mean that the Federal Reserve is considering lowering interest rates.
Jeffrey Gundlach, legend of Wall Street, warned in December that the FED’s actions seem to be a “suicide mission”. He wanted to raise interest rates at the same time as US debt is growing.