Fed Chair Jerome Powell sounds alarm on rising US debt, says current path 'not sustainable'

Federal Reserve Chairman Jerome Powell will see his term end in May this year, but before he leaves, he has warned the administration of an impending disaster waiting to happen. Speaking at Harvard University on Monday, Powell said that the American national debt was rising at an alarming rate, much higher than the rate at which the economy was growing. The Fed Chair warned that it was becoming unsustainable and needed urgent attention.

"The federal government debt is growing substantially faster than our economy. That ratio is going up," Powell said. Admitting that the level of the debt was not unsustainable just yet, Powell warned that it might not be long before that changes. "It will not end well if we don't do something fairly soon," Powell said after explaining the urgency to take measures that boost the economy. "The level of the debt is not unsustainable. But the path is not sustainable," he said. "It's really important that we get back to...we need to have that primary balance and begin to have the economy actually growing more quickly."

Powell, who has served under both President Donald Trump and former President Joe Biden, will be stepping down as Fed Chair in May to make way for Kevin Warsh at a time when the Iran conflict continues to strain global markets. Interacting with students at Harvard University, Powell also addressed the possible economic strains the country may face as a result of the military operation. Acknowledging that inflation expectations "appear to be well anchored beyond the short term," Powell said that the Federal Reserve is not facing the question yet, but indicated that it may step in if the situation demands. "We will eventually maybe face the question of what to do here. We’re not really facing it yet, because we don’t know what the economic effects will be, but we’ll certainly be mindful of that," he said.  

President Trump has, on several occasions, asked Powell to slash interest rates, something the Fed Chair has continued to refuse. Powell is also facing a criminal investigation by the Department of Justice over the central bank's renovation of its Washington headquarters. Speaking about the proceedings, Powell had said, "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president."