(Kitco News) - Some economists are voicing their concerns over the Federal Reserve's approach to fiscal policy and interest rates. In a recent interview with Jeremy Szafron, Anchor at Kitco News, Claudia Sahm, a former Federal Reserve economist, pointed out that the Fed's recent comments on the federal debt were unusual, emphasizing that traditionally, the Federal Reserve does not comment on fiscal policy routes. She said, "There's no excuse for that... The Fed should have and does not have any opinion on the path of the federal debt," underscoring the importance of the Fed staying within its designated lane of monetary policy.
This comes after Federal Reserve Chair Jerome Powell said in a “60 Minutes” interview with Scott Pelley., “The U.S. federal government’s on an unsustainable fiscal path. And that just means that the debt is growing faster than the economy. So, it is unsustainable. I don’t think that’s at all controversial,” Powell commented when asked if the national debt is a danger to the economy.
In early January, the U.S. national debt broke a new record by exceeding $34 trillion, a notable milestone reached just over three months following its previous leap past $33 trillion, as per the latest figures from the U.S. Treasury.
Sahm also critiqued the Federal Reserve for its cautious stance on adjusting interest rates amid changing inflation levels. She highlighted a tension in the Fed's policy, noting the delay in rate adjustments could hinder economic growth. Sahm elaborated on the need for the Fed to act more swiftly, stating, "They're going to have to... realize they want to get confident. They want to see more. But there is a tension between we're not going to cut before two. And frankly, by the time they get to two, by inflation is at two, the Fed should be out of the way... how slow they are."
Watch the full Kitco News interview above to hear more about Claudia Sahm's perspectives on the Federal Reserve's policies and their implications.