Powell emphasizes seven years: America's fiscal path is "unsustainable".

On 20 May, Fed Chair Jerome Powell consistently emphasized a theme for nearly seven years: the “unsustainable” fiscal path in the United States. This phrase has been used repeatedly by him to describe the federal deficit, and although he has made it clear that the Fed has no authority to set fiscal policy and cannot solve the dilemma alone, his position has long been widely known. The Fed’s role is to set monetary policy and supervise the banking system, not to interfere in Washington’s fiscal affairs. “We are not responsible for fiscal policy, but in the long run, fiscal policy will have a significant impact on the economy.” Powell said at a press conference in September 2018. At that time, he had only been in office for eight months, and he was blunt: “We have been on an unsustainable fiscal path for a long time, and there is no escaping it. Ultimately, we have to face reality – and the sooner the better.” Today, seven years later, Powell still stands by this view. On April 16, he warned, “We are running a huge deficit at full employment, and this needs to be addressed urgently.” On May 7, he again stressed that debt “is on an unsustainable path and Congress must find a way to get back on track,” but added that “it’s not something we should be proposing.” After Moody’s removed the U.S. AAA rating last Friday, the fiscal crisis became even more urgent. The agency noted that if Congress extends Trump’s 2017 tax cuts in accordance with Republican wishes, the deficit will increase by $4 trillion over the next decade, and Powell and Trump are also at odds on interest rate policy. Trump has recently put renewed pressure on interest rate cuts, while the Federal Reserve has left its benchmark interest rate unchanged at 4.25%-4.5% this month. The market expects two rate cuts for the year to kick in September. Powell’s term ends in May of next year, and his tenure as a director runs through January 2028.