Federal Reserve Chair Jerome Powell has issued a warning, stating that the United States is on an “unsustainable fiscal path,” with the current debt level surpassing economic growth.
During a January 4 interview with 60 Minutes, Powell emphasized that it is now “past time” for elected U.S. officials to engage in an “adult discussion” regarding reducing the level of debt in the economy.
Powell explained, “In the long run, the U.S. is on an unsustainable fiscal path. The U.S. federal government is on an unsustainable fiscal path, and that just means that the debt is growing faster than the economy.”
The price of Bitcoin experienced a setback when the Federal Reserve opted to maintain interest rates at 5.25%–5.50% recently and indicated no rate cuts in March. Powell reiterated that the Fed is awaiting strong evidence of economic strength before considering rate cuts.
Rate cuts are generally seen as positive for risk assets like cryptocurrencies and growth-oriented technology companies such as Apple and Nvidia. Lower interest rates make borrowing cheaper, typically boosting spending activity and risk appetite in the broader economy.
Powell expressed his belief that inflation would continue to decline in the first half of the year. He indicated that the central bank would reevaluate its strategy at the next Federal Open Market Committee meeting in March. Powell added that moving sooner would be considered if weaknesses appeared in the labor market or if inflation convincingly decreased.
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