Ranking Member Waters questions tariff impacts on treasury market during Congressional hearing

The U.S. House Committee on Financial Services convened on April 9, 2025, to discuss critical issues surrounding U.S. Treasury debt and its implications for the monetary system. The meeting featured a series of discussions focused on the impact of international practices, trade policies, and the resilience of the Treasury market.

The session began with a query regarding lessons that could be learned from other countries, such as Canada, the UK, New Zealand, and Sweden, regarding their balance sheet management. A committee member sought insights into how these nations effectively adjusted their balance sheets relative to their economies. However, a panelist acknowledged a lack of familiarity with these countries' operations but indicated that there are indeed lessons to be learned. The panelist committed to providing written responses to the committee on this matter.

Following this, Representative Maxine Waters directed her comments to Dr. Lane, expressing gratitude for his service in various financial roles, including at the Federal Reserve and the Treasury. Waters criticized the current administration's trade policies, particularly those initiated by former President Trump, which she argued have led to increased prices for consumers and potential inflationary pressures. Dr. Lane concurred with her assessment, noting that the unexpected rise in tariffs could disrupt the economy, leading to inflation and reduced demand.

Waters further inquired about the implications of these tariffs on the Treasury market. Dr. Lane explained that the functioning of the Treasury market is crucial for monetary policy. He highlighted that if the Federal Reserve needs to intervene by purchasing securities during a period of high inflation, it could create conflicts with its monetary policy objectives. He emphasized the importance of strengthening Treasury market resilience to navigate these challenges effectively.

The meeting concluded with a recognition of the complexities surrounding U.S. Treasury debt and the need for ongoing discussions to enhance market stability and address the potential impacts of trade policies on the economy. The committee members expressed their commitment to further exploring these issues in future sessions.