Fed Says Failure To Lift Debt Limit Would Cause Severe Consequences

by San Antonio Attorney

The United States Federal Reserve said on Tuesday that a delay, even just a short one, in paying the debt obligations of the Treasury Department would possibly result in serious market disruptions.

The delay of payments would have a long-term impact on the costs that the U.S. will incur when it borrows money, according to the minutes of the meeting of a Federal Open Market Committee held in June.

The Federal Reserve said that those who participated in the meeting were concerned of the potential impact on financial markets if the federal debt ceiling is not lifted on time.

The current borrowing limit of the federal government is $14.29 trillion. It had been reached in May. The Treasury Department cautioned the world’s biggest economy will default if the deal to raise the limit is not reached by August 2.

The central bank policymakers said that the uncertainty of the outcome on the debate over lifting the debt limit as well as the problems involved in a short-term solution is one of the major risks that the nation’s economy has to deal with.

The central bank added that the recovery of the economy has been slow in the past few months and the unemployment rate has been declining.

According to the minutes of meeting, the inflation rate increased in 2011. Prices of some goods and imported products have increased, but a long-term inflation is not expected.

The Federal officials have set up probable steps for a gradual exit from the present monetary policy.  The target for the federal funds rate will also be raised when the time comes that the U.S. economic conditions allow it.

Since the crisis started in 2008, the Fed has dedicated more than $2 trillion to improve the U.S. economy.

If you are in debt like the United States, and need help.  You do not have to wait for politicians to act.  Seek help from a qualified San Antonio Bankruptcy attorney.

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