FED’s Mester Outlines Concerns Over U.S. Debt-to-GDP

Posted Monday, May 14, 2018 by
Shain Vernier • 2 min read

It has been a bullish open to the week on Wall Street. U.S. indices are trading decisively in the green, with commodity pricing mixed. WTI crude oil is above $71.00 and gold futures have dipped slightly but remain near $1320.0. The USD is experiencing some pressure, showing weakness against the Euro, British pound, and Aussie.

U.S. FED’s Mester Speaks

Today’s economic calendar is relatively vacant. However, policymakers from the European Central Bank (ECB) and U.S. Federal Reserve (FED) have issued commentary regarding their outlook for the future.

FED member Loretta Mester took to the airwaves a bit earlier, citing concerns over current U.S. debt levels. Stating that the growing U.S. debt-to-GDP ratio is not sustainable, Mester encouraged a more aggressive stance toward monitoring the debt load before “things get out of hand.”

No doubt about it, both U.S. and global debt levels are pushing all-time highs. Global debt has been estimated at $164 trillion, 225% of global GDP. Debt in the U.S. is growing, now sitting at levels not seen since the mid-1940s. Mester’s concerns are certainly warranted and getting control of the situation appears a priority.

What Is The FED Going To Do?

Today’s commentary from FED players has echoed the tone of the last meeting of the FOMC. “Gradual tightening” is going to be the order for the remainder of 2018. Sustained 2% inflation and a positive U.S. economic outlook will be the catalysts for as many as three more rate hikes for this calendar year.

As the Summer months approach, be on the lookout for consistently strong U.S. economic data. Robust real estate, increased oil production, and high levels of consumer confidence/consumption are highly likely to give investors a bullish view of the markets. Given this scenario, the FED will be positioned to raise rates in June, September, and possibly December.

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