US Congressional Budget Office Announcement
Deficit-to-GDP Ratio Expected to Widen from 4.6% to 5.4%
Trump Says, "Interest Rates Must Be Lowered to Reduce Debt Repayment Burden"
[Asia Economy New York=Correspondent Baek Jong-min] The U.S. federal government debt is expected to surge over the next 10 years, reaching 98% of the Gross Domestic Product (GDP).
The Congressional Budget Office (CBO) announced in a report on the 28th (local time) that the U.S. government debt is expected to reach $31.4 trillion by the end of 2030. This is an upward revision from the estimate made by the CBO last August and represents the highest level since the end of World War II.
The CBO estimated that the federal government's fiscal deficit for the 2020 fiscal year will exceed $1 trillion for the first time since 2012. From 2021 to 2030, the average annual deficit is expected to reach $1.3 trillion, and the fiscal deficit ratio relative to GDP is projected to increase from 4.6% to 5.4%.
The increase in the U.S. fiscal deficit and national debt is linked to the Trump administration's tax cut policies and expanded fiscal spending. President Trump, who announced large-scale tax cuts after taking office, recently instructed the administration to prepare a second round of tax cuts.
The CBO assessed that since there is strong bipartisan support in Congress for expanding government fiscal spending, the possibility of reducing fiscal expenditures is low.
President Trump has continuously pressured the Federal Reserve (Fed) to lower interest rates, arguing that rate hikes burden economic recovery. On this day as well, as the Fed began its two-day Federal Open Market Committee (FOMC) meeting, Trump again insisted that the Fed should cut interest rates, but he made a different argument than usual.
President Trump stated, "The Fed must be smart and lower rates to make them competitive," adding, "The focus should be on repaying and refinancing debt." This can be interpreted as an argument that lowering interest rates is inevitable to minimize the increasing burden of repaying national debt.
The market expects the FOMC to keep the benchmark interest rate unchanged at the current 1.5?1.75% during this meeting.
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