Deficits may hurt US response to recessions, says Fed official

Finance

Eric Rosengren

The now “large” U.S. deficits may complicate the government’s ability to curb future recessions with tax and spending policies, so the Federal Reserve must depend less on fiscal policy, a top Fed policymaker said on Friday.

“Large deficits now may make future actions difficult” for the government, Boston Fed President Eric Rosengren said in prepared remarks to a conference of central bankers and economists here. He added it was “difficult to depend on” fiscal policies in the face of a recession “given political pressures and uncertainties.”

Since mid-December the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

 

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