Economy
Yellen: U.S. financial and economic disaster awaits if Congress fails to raise the debt ceiling
Is the U.S. economic crisis getting closer? U.S. Treasury Secretary Janet Yellen said the country faces a financial and economic disaster if Congress and the White House do not act to raise the national debt ceiling. She said inaction by lawmakers and the government would lead to a default, and it would “cause a financial and economic disaster.”
“In the long run, a default would increase the cost of borrowing indefinitely. Future investments, including government investments, would become significantly more expensive. This increases the risk of U.S. economic collapse,” Yellen said, speaking at a meeting of the National Association of Counties.
She added that in the event of a default, “household payments on mortgages, auto loans and credit cards would rise, and U.S. businesses would face deteriorating credit markets.”
“In addition, it is unlikely that the federal government would be able to issue payments to millions of Americans, including families of our military and seniors who rely on Social Security,” the secretary warned.
As Politico notes, Yellen’s statements come ahead of Congressional Budget Office projections expected to be releasedWednesday, which clarify the agency’s expectations for when the Treasury will no longer be able to pay its obligations in full if the debt limit is not raised. All of this has ramifications for the stock market, the S&P 500 and other indices.
In January, Yellen warned in a letter to congressional leaders that “government default would cause irreparable harm to the U.S. economy, the livelihoods of all Americans and global financial stability.”
She said an increase or suspension of the debt limit was needed to avoid a default. The current limit is $31.4 trillion.
The debt ceiling was reached on January 19. At the same time, according to media estimates, “Day X” may come about the middle of this year. Yellen believes that the accumulated cash reserves may be enough until early June.
The debt ceiling debate sparked a political standoff between Republican lawmakers who control the House of Representatives and who want to cut spending and President Joe Biden and Democratic lawmakers who insist on raising the debt limit unconditionally.
Earlier we reported that the heads of the leading U.S. banks are optimistic about the U.S. economy, but reasons for concern remain.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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