financial sector. this is a good thing because that sector is less capitalized, less liquid and much more opaque than traditional banks. all of this is contributing to slower growth in china, but it ’ s the right path to more sustainable growth in the future. unfortunately, the trade conflict is making what was already a delicate balancing act for the chinese authorities even tougher. finally, economic growth will make public debt more sustainable — if we play our cards right. research has found that the costs of public debt are low when a country ’ s economic growth rate is higher than the inflation - adjusted interest rate on its public debt. 14 it ’ s just arithmetic. in this situation, growth will keep debt as a percentage of gdp on a stable or declining path, even if a country is running a limited budget deficit. if new borrowing follows the golden rule of fiscal policy — borrowing to make investments that support stronger long - term growth, such as infrastructure — then there is even more scope for debt to grow while remaining sustainable. according to bank estimates, many countries could grow over the medium term at a rate that exceeds the interest rate on their debt. should countries stay on this growth path and governments limit new borrowing, current public debt loads could be more sustainable. it ’ s important to remember that a stable debt - to - gdp ratio does not guarantee sustainability. a credible macroeconomic framework is critical to maintaining faith in a government ’ s creditworthiness, achieving growth and avoiding instability. sound fiscal and monetary policies are at the core of this. that includes maintaining or building some fiscal space for when it ’ s needed. this was the case in canada when fiscal stimulus was used to respond to the global financial crisis and to the oil price shock a few years ago. this helps central banks achieve their inflation objectives, which is our part in supporting strong and sustainable growth. 15 we also saw the importance of sound policy frameworks late last year as capital flowed out of emerging - market economies. investors clearly differentiated between countries that had sound frameworks and those that didn ’ t, which limited the spillovers. what else still needs to happen? we ’ re in a better place than you might glean from the news. but that doesn ’ t mean there is nothing left to do — there certainly is. high leverage will always be an important vulnerability because of its hooks into the rest of the global financial system. we need to better understand these linkages to determine if additional safeguards are needed. 4 / 6

jerome h powell : semiannual monetary policy report to the congress testimony by mr jerome h powell, chairman of the board of governors of the federal reserve system, before the committee on financial services, us house of representatives, washington dc, 27 february 2018. * * * chairman hensarling, ranking member waters, and members of the committee, i am pleased to present the federal reserve ’ s semiannual monetary policy report to the congress. on the occasion of my first appearance before this committee as chairman of the federal reserve, i want to express my appreciation for my predecessor, chair janet yellen, and her important contributions. during her term as chair, the economy continued to strengthen and federal reserve policymakers began to normalize both the level of interest rates and the size of the balance sheet. together, chair yellen and i have worked to ensure a smooth leadership transition and provide for continuity in monetary policy. i also want to express my appreciation for my colleagues on the federal open market committee ( fomc ). finally, i want to affirm my continued support for the objectives assigned to us by the congress — maximum employment and price stability — and for transparency about the federal reserve ’ s policies and programs. transparency is the foundation for our accountability, and i am committed to clearly explaining what we are doing and why we are doing it. today i will briefly discuss the current economic situation and outlook before turning to monetary policy. current economic situation and outlook the u. s. economy grew at a solid pace over the second half of 2017 and into this year. monthly job gains averaged 179, 000 from july through december, and payrolls rose an additional 200, 000 in january. this pace of job growth was sufficient to push the unemployment rate down to 4. 1 percent, about 3 / 4 percentage point lower than a year earlier and the lowest level since december 2000. in addition, the labor force participation rate remained roughly unchanged, on net, as it has for the past several years — that is a sign of job market strength, given that retiring baby boomers are putting downward pressure on the participation rate. strong job gains in recent years have led to widespread reductions in unemployment across the income spectrum and for all major demographic groups. for example, the unemployment rate for adults without a high school education has fallen from about 15 percent in 2009 to 5 - 1 / 2 percent in january of this year, while the jobless rate for those with a college degree has moved down from 5 percent to