Federal Reserve Chairman Jerome Powell has warned of “highly uncertain and adverse” economic consequences if the United States fails to meet its debt obligations. “No one should assume that the Fed can shield the economy from the potential short-term and long-term effects of not paying our bills on time,” he further warned.
Fed Chairman Jerome Powell’s Debt Default Warning
Federal Reserve Chairman Jerome Powell has warned of the potential consequences of defaulting on US debt. “We would be in uncharted territory and the consequences for the US economy could be very uncertain and adverse,” he added. said this week, adding:
No one should assume that the Fed can shield the economy from the potential short- and long-term effects of not paying our bills on time.
Powell’s warning came after the Federal Reserve raised key interest rates by 25 basis points this week – its 10th hike in 14 months. This increase brings the federal funds rate to a target range of 5% to 5.25%, the highest since August 2007.
The Federal Reserve Chairman noted that Fed officials had discussed the potential risk of the U.S. debt limit at their last Federal Open Market Committee (FOMC) meeting, but the topic had not been discussed. impact on their decision to raise rates.
Many people have warned of the disastrous consequences of defaulting on US debt. Treasury Secretary Janet Yellen, for example, warned that it would “produce economic and financial catastrophe”. European Central Bank (ECB) President Christine Lagarde said it would be a “major catastrophe” if the United States were to default on its debt obligations.
As Democrats and Republicans remain deadlocked on raising the debt ceiling, Yellen revealed this week that the Treasury Department will not be able to pay all government debt “as of June 1, if Congress does not raise or suspend the debt ceiling before that time.”
Powell pointed out that the Federal Reserve was not getting involved in negotiations on this topic, saying:
We don’t give advice to either… We would just like to stress that it is very important that this is done.
What do you think of Fed Chairman Jerome Powell’s warning about the US defaulting on its debt obligations? Let us know in the comments section below.
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