Federal Reserve Chair Warns Against Assumption it Can Protect the Economy in a Debt Default

Federal Reserve chair Jerome Powell has warned against the assumption that it can protect the economy in the case of a debt default. Specifically speaking on the current debt ceiling debate on Capitol Hill and what could occur if the government can’t pay its bills.

Powell is speaking today at the Federal Reserve’s Semi-Annual Monetary Policy Report. Moreover, these statements follow Powell’s grim prognosis on the economy made yesterday. Noting that interest rates are likely to see more raising in the coming year as the fight against inflation continues.

FED Chair Talks Potential Debt Default

Earlier this year, the United States government surpassed its $31.4 trillion debt limit. Thus, exciting a debate on Capitol Hill seeing both sides of the aisle fight over whether or not to raise the debt ceiling. Subsequently, the summer months could see the economic state of the country turn disastrous if a decision isn’t reached.

Now, speaking today, Federal Reserve chair Jerome Powell has warned against the assumption that it can protect the economy in the case of a debt default. Moreover, noting the potentially horrific implications of such a development.

The current conflict has seen Republicans desire a more strict budget, opposing a debt ceiling increase. As Democrats are in favor of an increase under the terms of the current budgetary agreements. Additionally, Joe Biden is set to propose an updated budget for 2024, which includes a federal pay increase of 5.2%.

Whether or not they can arrive at a bipartisan agreement is still uncertain. Yet, the only true certainty is the devastation that could arise from a US debt default from the situation remaining unsolved.

CNBC reports that the Treasury has the means to last until this summer through extreme measures. Conversely, CBO director Phillip Swagel stated last month “the extraordinary measures could be exhausted sooner, and Treasury could run out of funds before July,” according to IRS data that should be revealed in April.

Source: https://watcher.guru/news/federal-reserve-chair-warns-against-assumption-it-can-protect-the-economy-in-a-debt-default