Federal Reserve Chairman Jerome Powell said on April 1 that the U.S. must address its growing national debt and remain vigilant about risks to the financial system, during a talk with students at Harvard University.
Powell spoke with undergraduates in “Principles of Economics,” a course co-taught by Jason Furman and David Laibson, with Laibson moderating the discussion. He addressed concerns about inflation, global conflicts, and economic growth.
The chairman stated that while the Federal Reserve remains committed to its target inflation rate of 2 percent despite recent challenges such as tariffs and conflict in Iran, it will take a “wait-and-see” approach regarding potential impacts from rising oil prices due to instability in the region. Powell said that “the Fed remains committed to its target inflation rate of 2 percent even against headwinds created by U.S.-imposed tariffs and the conflict in Iran.” He described recent economic performance as “a soft landing,” referencing stable growth rates and low unemployment seen in late 2024.
Addressing fiscal policy, Powell warned about unsustainable government spending: “Our $39 trillion debt is not the real problem… it’s that the current path Congress is on — spending more than the U.S. is taking in — is ‘not sustainable.'” He added, “It will not end well if we don’t do something fairly soon.” Despite these concerns, he expressed confidence in America’s financial resilience: “We have a hugely resilient financial system,” he said.
On emerging threats such as private credit markets or systemic risk factors similar to those preceding the 2008 crisis, Powell explained that vigilance rather than eliminating all risk should be central for regulators: “You just need to always know that there’s another thing coming.”
Powell also commented on labor market challenges for young people but encouraged optimism given historical trends of U.S. dynamism since World War II. While declining to discuss political nominations for his successor directly, he defended central bank independence: “We’re not trying to work against any politician or any administration… The Fed is not a perfect institution… but it’s a great American institution and I’m very proud to work with the people I work with.”
He concluded by emphasizing how interference with Federal Reserve independence could harm both democratic institutions and economic stability: “It’s very hard to build great democratic institutions and much easier to bring them down.”
