Biden, McCarthy hope to reach deal on U.S. debt ceiling
U.S. President Joe Biden and U.S. House Speaker Kevin McCarthy are actively engaged in negotiations to expedite the process of raising the national debt ceiling. The current limit for public borrowing stands at $31.4 trillion, and the aim is to eliminate the risk of default. Defaulting on the national debt could have severe consequences for global indices such as the S&P 500 and even Bitcoin, causing significant declines.
Biden emphasized the necessity of negotiations, stating, “We will negotiate because there is no choice.” He clarified that the negotiation pertains to the budget framework and not the question of fulfilling government obligations, as all congressional leaders have agreed that default will be avoided.
House Speaker McCarthy, with whom Biden is directly consulting, believes that reaching a deal by Sunday is feasible.
The U.S. Treasury Department has warned that if Congress fails to raise the borrowing limit in a timely manner, the country could face a sovereign default as early as June 1, which would result in an economic disaster.
Republicans, who currently hold a majority in the House of Representatives with 222 votes to 213, have insisted for the past six months that Democrats must agree to reduce government spending in exchange for raising the debt ceiling set by Congress.
McCarthy, a Republican, expressed confidence that the United States would not default on its sovereign debt now that Congressional leaders and the Biden administration have entered into negotiations.
As a precautionary measure, Democratic lawmakers are introducing a special petition in the House that, if necessary, would bypass regular legislative procedures and swiftly vote on raising the government borrowing limit, according to Democratic caucus leader Hakeem Jeffries.
McCarthy stated, “I don’t think we’ll end up having a debt default.” He expressed confidence in reaching an agreement, despite the tight timeline, and emphasized that everyone involved is committed to achieving a result. McCarthy also noted that tax issues would not be part of the current negotiations.
Biden confirmed his readiness to continue the debt-ceiling talks and adjusted his Asia diplomatic tour, canceling a visit to Papua New Guinea to focus on the negotiations.
Meanwhile, Senate Majority Leader Chuck Schumer is meeting with heads of major U.S. banks, including JPMorgan and Citigroup, to discuss the issue of the debt ceiling, according to Bloomberg.
Earlier, we reported that Musk demanded to coordinate with him personally the hiring of any Tesla employee.
Fed Chair Powell to testify at US Senate June 22
Federal Reserve Chair Jerome Powell will testify at the U.S. Senate Banking Committee on June 22 at 10 am Eastern time, panel chief Sherrod Brown said on Friday.
The testimony marks the second iteration of the Fed chair’s twice-yearly reports to Congress on the state of U.S. monetary policy, and will come a week after the Fed’s upcoming interest-rate-setting meeting at which it is expected to leave borrowing costs unchanged despite still-high inflation.
S&P spares France from rating downgrade
Ratings agency S&P spared France on Friday the embarrassment of downgrading the country’s sovereign debt, but remained cautious about the outlook on account of the strained public accounts.
S&P left the country’s AA rating untouched after a regular review and said that the outlook remained negative due to “downside risks to our forecast for France’s public finances amid its already elevated general government debt”.
A downgrade would have been the second in six weeks after rival agency Fitch cut its rating at the end of April to AA- over concerns about potential political paralysis and social unrest.
Finance Minister Bruno Le Maire told weekend newspaper Le Journal du Dimanche that S&P’s decision to keep its AA rating was a “positive signal” and that the government’s public finance strategy was credible.
President Emmanuel Macron’s government is under pressure to prove that the government can stick to its deficit and debt reduction plans in the face of stubbornly high public spending and a rising cost of interest payments.
ECB’s Visco says falling energy prices should help tame inflation
The rapid decline in energy costs should help to tame inflation in Europe, Bank of Italy governor Ignazio Visco said on Saturday, urging companies not to seek to boost their margins by leaving prices higher for longer.
Visco, a member of the European Central Bank’s governing council, said the key issue was what happened to inflation now that energy prices had retreated from peaks hit after last year’s Russian invasion of Ukraine.
“I expect that at this point there will also be a cooling in the increase in core inflation, as we call it, which should reflect this reduction in the cost of energy,” Visco told the International Economy Festival in Turin.
“If this happens, (ECB) monetary policy is certainly the correct one at the moment even if I would perhaps have pressed for a more gradual approach,” he added.
Euro zone inflation eased more than expected in May fuelling a debate about the need for further ECB rate hikes beyond an increase expected later this month.
Inflation in the 20 nations sharing the euro eased to 6.1% in May from 7.0% in April, below expectations for 6.3% in a Reuters poll of economists.
Core inflation, which excludes volatile food and fuel prices and which has played an increasing role in the ECB’s policy deliberations, fell to 5.3%.
Visco warned against a wage-price spiral, saying salary rises should come against a backdrop of a growing economy rather than chasing inflation.
He also said companies had a role to play in ensuring that inflation was brought under control so that the ECB did not keep having to push up the cost of borrowing.
“It is not in the interest of companies themselves … to fail to reflect the lower cost of energy in their prices because then the cost of financing would rise,” he added.
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