© Reuters. U.S. House Speaker Kevin McCarthy (R-CA) speaks with reporters as the deadline to avert a partial government shutdown approaches on Capitol Hill in Washington, U.S., September 28, 2023. REUTERS/Craig Hudson/ File Photo
By Moira Warburton and David Morgan
WASHINGTON (Reuters) – Hardline Republicans in the U.S. House of Representatives on Friday rejected a bill proposed by their leader to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning on Sunday.
In a 232-198 vote, the House defeated a measure that would extend government funding by 30 days and avert a shutdown. That bill would have slashed spending and restricted immigration, Republican priorities that had little chance of passing the Democratic-controlled Senate.
The defeat left Republicans – who control the chamber by 221-212 – without a clear strategy to avert a shutdown that would close national parks, disrupt pay for up to 4 million federal workers and hobble everything from financial oversight to scientific research if funding is not extended past 12:01 a.m. ET (0401 GMT) on Sunday.
After the vote, House Speaker Kevin McCarthy said the chamber might still pass a funding extension without the conservative policies that had alienated Democrats. But he declined to say what would happen next. The chamber is expected to hold more votes on Saturday.
“It’s only a failure if you quit,” he told reporters.
It was not clear whether the Senate would act in time, either. The chamber was due on Saturday afternoon to take up a bipartisan bill that would fund the government through Nov. 17, but procedural hurdles could delay a final vote until Tuesday.
U.S. Treasury Secretary Janet Yellen said on Friday that a government shutdown would “undermine” U.S. economic progress by idling programs for small businesses and children and could delay major infrastructure improvements.
The shutdown would be the fourth in a decade and just four months after a similar standoff brought the federal government within days of defaulting on its $31 trillion debt. The repeated brinkmanship has raised worries on Wall Street, where the Moody’s (NYSE:) ratings agency has warned it could damage U.S. creditworthiness.
HEAVY TOLL ON MILITARY, SAYS BIDEN
Biden warned that a shutdown could take a heavy toll on the armed forces.
“We can’t be playing politics while our troops stand in the breach. It’s an absolute dereliction of duty,” Biden, a Democrat, said at a retirement ceremony for Mark Milley, a senior general.
McCarthy had hoped the Republican spending bill’s border provisions would have won over holdouts who so far have defied efforts to avert a shutdown.
In the end, 21 hardline House Republicans sided with Democrats to defeat the measure.
“There are members who don’t care whether the government stays open or it shuts down,” said Republican Representative Kat Cammack told reporters. “The ones that I believe are OK with a shutdown have never been through a shutdown.”
Holdouts say Congress should focus on writing detailed spending bills that would cover the entire fiscal year, rather than temporary extensions, even if doing so prompts a shutdown. The House has passed four full-year bills so far, though they stand no chance of winning Senate approval.
“What does work is rolling up our sleeves and getting onto these single subject bills and moving them,” Representative Matt Gaetz said on a podcast after voting against the stopgap bill on Friday.
Other Republicans said they would probably have to work with Democrats to pass a stopgap bill that could win approval in the Senate and from Biden. “Some people are missing the obvious,” said Republican Representative Don Bacon.
McCarthy said he was considering that approach but would not accept additional aid to Ukraine that Biden has requested and lawmakers in the Senate are including in their stopgap bill.
Former President Donald Trump, Biden’s likely election opponent in 2024, criticized Senate Republicans for working with Democrats.
Gaetz and a handful of other hardliners have threatened to oust McCarthy from his leadership role if he relies on Democratic votes.
“We’re in the middle of a Republican civil war that has been going on for months, and now threatens a catastrophic government shutdown,” top House Democrat Hakeem Jeffries told reporters.
McCarthy and Biden in June agreed to a deal that would have set agency spending at $1.59 trillion in fiscal 2024, but hardliners like Gaetz say that figure should be $120 billion lower. Lawmakers are not considering cuts to popular benefit programs such as Social Security and Medicare that make up a larger portion of the government’s $6.4 trillion budget.
JPMorgan CEO Jamie Dimon warns of recession and high interest rates
NEW YORK – JPMorgan Chase (NYSE:) CEO Jamie Dimon has issued a stark warning about the potential for a global economic downturn, emphasizing the need for preparedness amid rising inflation and economic headwinds. According to media reports today, Dimon cautioned that high-interest rates, which could peak at 7%, may lead to a soft landing or even a mild recession as the global economy seeks to stabilize after the pandemic.
Dimon pointed out that while the U.S. has managed to avoid a recession throughout 2023, it’s crucial not to expect an endless economic boom. He highlighted that severe risks stemming from the pandemic’s aftermath could significantly impact both U.S. and global markets. Wall Street and international investors are paying close attention to Dimon’s experienced-based insights as they face an uncertain financial climate.
Further complicating the economic landscape, Dimon drew attention to the U.S. economy’s “addiction” to debt and central bank liquidity injections, likening it to “heroin.” He argued that pandemic-era stimulus measures have created an economic “sugar high,” with artificially boosted consumer spending and stock market values. Although these efforts helped prevent a depression, he warned against underestimating the persistence of inflationary pressures and anticipates more interest rate hikes.
Dimon also suggested that significant drops in global corporate profits could be on the horizon as economies attempt to return to normalcy without government stimulus. Additionally, he underscored geopolitical tensions, particularly in the Middle East, as potential triggers for market disruptions that could further complicate the economic recovery.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
China has more space to cut reserve ratio instead of interest rates, says ex-official
© Reuters. FILE PHOTO: Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang/File Photo
BEIJING (Reuters) – China is likely to implement proactive fiscal policy next year as there is still a need for the world’s second-biggest economy to realise stable growth, a former central banker was cited as saying in state-owned media on Sunday.
The comment comes as the economy struggles for momentum after being hobbled by lengthy pandemic-busting measures, while market watchers fear severe debt woe among major property developers could spill over to other sectors.
“It is expected that next year China will continue to implement positive fiscal policy, monetary policies that are in line with positive fiscal policy, with a relatively large policy space to lower the reserve requirement ratio,” Sheng Songcheng, a former statistics and analysis director of the People’s Bank of China, said in comments reported by Shanghai Securities News.
With interest rates and loan prime rates at low levels, there is more space to cut banks’ reserve requirement ratio (RRR) than to cut interest rates, Sheng said.
The central bank lowered the RRR in September for the second time this year to boost liquidity and support economic recovery. Analysts expect another cut by year-end.
The weighted average RRR for financial institutions was around 7.4% after the cut.
China is prudent in cutting interest rates as its monetary policy needs to consider internal and external balance, Sheng said.
“It is expected that the interest rate differential between China and the U.S. will enter a period of stabilisation, so the (yuan) is likely to maintain a mild appreciation trend, but the appreciation is limited.”
‘Way too early’ to declare victory over inflation, says ECB’s Nagel
© Reuters. Joachim Nagel, President of Germany’s federal reserve Bundesbank addresses the media during the bank’s annual news conference in Frankfurt, Germany March 1, 2023. REUTERS/Kai Pfaffenbach/File Photo
NICOSIA (Reuters) – Euro zone inflation will carry on declining in the months ahead but at a slower pace, Bundesbank President Joachim Nagel was quoted as telling Cypriot newspaper Kathimerini on Sunday.
Euro zone inflation eased to 2.4% in November from 2.9% in October, well below expectations for a third straight month and fuelling market speculation that European Central Bank (ECB) rates could come down quicker than the bank now guides.
“We have not yet won the fight against inflation,” said Nagel, who visited Cyprus last week. He described inflation as a ‘stubborn, greedy beast’ and said the next phase of wrestling it down would be more difficult.
“Add in a scenario where an escalation of geopolitical tensions could imply higher inflation and it becomes clear that it would be way too early to declare victory over high inflation rates,” said Nagel, an influential voice on the ECB’s rate setting Governing Council.
“I can’t tell whether interest rates have already reached their peak. On the ECB Governing Council we decide on interest rates on a meeting by meeting basis following our data-dependent approach.”
Nagel added that the outlook for inflation was tempered by a weakening of dampening base effects and the phasing out of measures to cap high energy prices in many European countries. He also pointed to an expected continuation of strong wage growth.
“All in all, I expect inflation to carry on declining, but at a slower pace and with possible bumps along the way,” Nagel said.
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