In a speech delivered yesterday, Fed Chair Jerome Powell said that “business debt has clearly reached a level that should give businesses and investors reason to pause and reflect.” He pointed to corporate borrowing which hit record level of 35% of assets. And, he warned “another sharp increase…could increase vulnerabilities appreciably”.
Though, Powell also emphasized the debt problem is not at the level of systemic threat as the sub-prime mortgage markets. “As of now business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm,” he said.
Responding to some questions, Powell said “today’s inflation dynamics are very different from even 25 years ago. Globalization and technology may be playing a role”. Also, it was premature to make a judgement about the impact trade and tariff issues could have on monetary policy.
Powell’s speech on Business Debt and Our Dynamic Financial System.