Thomas Barkin, President of the Federal Reserve Bank (FRB) of Richmond, warned that the appalling growth of the United States' national debt will inevitably lead the country to a financial "trap." In comments to Bloomberg, the Federal Reserve official noted that the government can keep increasing borrowing as long as investors are willing to buy Treasuries. This is facilitated by the dollar's status as the world's reserve currency and the rule of law in the country. However, the main long-term risk is that, at some point, the market may refuse to finance the mounting debt.
Discussing current monetary policy, Thomas Barkin supported keeping the funds rate at its current level amid signs of a gradual inflation slowdown. At the same time, he emphasized that the regulator reserves the right to resume tightening monetary policy and raise interest rates if inflationary pressure in the economy becomes too stubborn or prolonged.
The statement comes against the backdrop of the US national debt surpassing the historic mark of $40 trillion. Earlier, President Donald Trump commented on the country's debt burden, stating that the only effective way to overcome the crisis is to accelerate the pace of economic growth.
