Fed Chair Powell 'Very Worried' About US Debt Levels

The S&P 500 traded slightly higher Thursday despite cautious economic commentary from Federal Reserve Chair Jerome Powell.

Powell spoke in front of the Economic Club of Washington D.C. Thursday, addressing several of his primary concerns ahead of a potentially slowing economy in 2019.

Powell’s Concerns

Powell reiterated that the Fed has no predetermined course of action in 2019 despite the FOMC's recent projection of two additional interest rate hikes in the next 12 months.

“Especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully,” Powell said, reiterating comments he made last week.

The Fed Chair addressed a handful of near-term and long-term concerns, including the potential negative impacts of the trade war, the government shutdown and ballooning U.S. national debt.

“The principal worry I would have is really global growth. If you look at Asia, Europe, you're seeing slowing in growth. The question would be, 'how does that affect us?'” Powell said.

Last week, Apple, Inc. AAPL cut its 2019 guidance and said slowing economic growth in China is to blame.

In addition to the trade war, Powell said the U.S. government shutdown is another near-term headwind for the economy, especially if it drags on for a long time.

“A longer shutdown is something we haven't had," he said. “If we have an extended shutdown, I do think that would show up in the data pretty clear.”

On Wednesday, credit rating agency Fitch warned that the U.S. could lose its AAA credit rating if the government shutdown continues.

While the shutdown and the trade war are short-term issues, Powell said U.S. debt is a long-term concern.

“I'm very worried about it,” he said. “It's a long-run issue that we definitely need to face, and ultimately, will have no choice but to face.”

Trump’s Criticism

President Donald Trump, who replaced Janet Yellen with Powell nearly a year ago, has been highly critical of the Federal Reserve’s decision to continue to raise interest rates.

“The only problem our economy has is the Fed,” Trump tweeted in December.

“They’re raising interest rates too fast because they think the economy is so good,” he said. 

Trump took another swipe at the Fed on Twitter this week.

“Can you imagine if I had long term ZERO interest rates to play with like the past administration, rather than the rapidly raised normalized rates we have today,” he tweeted Tuesday. 

Powell said Thursday that he has not been contacted by the White House for a meeting with Trump.

The SPDR S&P 500 ETF Trust SPY was up 0.35 percent at the time of publication and the SPDR Dow Jones Industrial Average ETF DIA was up 0.39 percent. 

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