Janet Yellen cautions that US debt may restrict the Federal Reserve

Janet Yellen Highlights Dangers of Rising U.S. Debt

On Sunday, Janet Yellen cautioned that the rapidly increasing national debt in the United States could significantly limit the options available to economic decision-makers and threaten the Federal Reserve's autonomy. She expressed concern that mounting political influence might override sound economic judgment in shaping monetary policy.

During a panel discussion titled "Future of the Fed" organized by the American Economic Association, Yellen explained that the country is edging closer to what is known as "fiscal dominance." In this scenario, the central bank may be compelled to maintain lower interest rates to ease the government's debt obligations, rather than responding to actual economic needs.

Yellen emphasized that the current conditions are setting the stage for this type of fiscal pressure on the Federal Reserve.