Powell urges Congressional panel to tackle budget deficits

WASHINGTON (AP) - Federal Reserve Chairman Jerome Powell is asking Congress to tackle the growing budget deficit.

Powell's remarks before the House Budget Committee Thursday came a day after he told Congress' Joint Economic Committee that the Fed was likely to keep rates unchanged in the coming months, unless there was a 'œmaterial'ť shift in the economy's outlook.

Powell is one of the few leading public figures urging Congress to reduce the federal government's annual deficit, which is nearing $1 trillion.

A large deficit will make it harder for Congress to cut taxes or boost spending when the next recession hits, Powell said. That is a concern because with the Fed's benchmark interest rate already low, the Fed also has a limited ability to respond to downturns.

Powell's remarks come two weeks after the Fed cut its short-term rate to a range of just 1.5% to 1.75%. Historically, the Fed has cut its rate by about 5 percentage points in recessions.

Yet Powell underscored his view that the economy is likely to keep growing, with little signs of a bubble forming that could later burst.

'œWe don't see the warning signs that appeared in other cycles, yet,'ť Powell said. 'œThere's no reason to think that I can see that the probability of a downturn is at all elevated.'ť