Ms. Yellen warns about the increasing risk of financial dominance over the US economy

Janet Yellen, the first female Chair of the Federal Reserve, warns that conditions leading to “fiscal dominance” in the US are becoming increasingly evident. Speaking at the annual conference of the American Economic Association in Philadelphia, she emphasized that rising federal debt poses a long-term threat to economic stability.

This statement comes amid US public debt surpassing $38.5 trillion by early 2026, much earlier than previous forecasts. Experts warn that excessive debt levels could force the Fed to keep interest rates low to reduce borrowing costs, rather than focus on controlling inflation — a scenario known as fiscal dominance, which risks undermining the independence of the central bank.

Yellen calls for urgent action to address fiscal imbalances, as deficits are expected to reach $1.9 trillion and debt approaches 100% of GDP. While some economists hope this risk will spur bipartisan budget reforms, many remain skeptical about the likelihood of reaching political consensus.