Ray Dalio says the Fed faces a tough balancing act as the economy faces 'enormous amount of debt'

cnbc.com:

As the U.S. Federal Reserve implemented its first interest rate cut since the early Covid pandemic, billionaire investor Ray Dalio flagged that the U.S. economy still faces an «enormous amount of debt.»

The central bank's decision to cut the federal funds rate by 50 basis points to a range of 4.75% to 5%. The rate not only determines short-term borrowing costs for banks, but also impacts various consumer products like mortgages, auto loans and credit cards.

«The challenge of the Federal Reserve is to keep interest rates high enough that they're good for the creditor, while keeping them not so high that they're problematic for the debtor,» the founder of Bridgewater Associates told CNBC's «Squawk Box Asia» on Thursday, noting the difficulty of this «balancing act.»

The U.S. Treasury Department recently reported that the government has spent more than $1 trillion this year on interest payments for its $35.3 trillion national debt. This increase in debt service costs also coincided with a significant rise in the U.S. budget deficit in August, which is approaching $2 trillion for the year.

On Wednesday, Dalio listed debt, money and the economic cycle as one of the top five forces influencing the global economy. Expanding on his point Thursday, he said he was generally interested in «the enormous amount of debt that is being created by governments and monetized by central banks. Those magnitudes have never existed in my lifetime.»

Governments around the world took on record debt burdens during the pandemic to finance stimulus packages and other economic measures to prevent a collapse.

When asked about his outlook and whether he sees a looming credit event, Dalio responded he did not.

«I see a big depreciation in the value of