Analysts at Wells Fargo estimate that the Federal debt ceiling could be reached in early October. They explained that if the federal government does not have a budget in place and if no deal is reached, the government would enter a partial shutdown on October 1st.
“Our base case remains that the true “X date” will fall in the first week of October. But, the late August/early September period could bring the government very close to running out of cash.”
“The House of Representatives is scheduled to leave Washington, D.C. for its August recess on July 26, while the Senate is scheduled to finish up on August 2. Neither chamber is scheduled to return until Sept. 9, making it much more difficult for policymakers to react quickly if the “X date” ends up being closer than analysts currently expect.”
“Given the uncertainty, why not lift the debt ceiling before leaving town? Indeed, politicians on both sides of the aisle have stated that they do not want to put the full faith and credit of the U.S. government at risk. The challenge is that policymakers in both parties have a strong preference to tie a debt ceiling vote to a broader budget deal.”
“If the federal government does not have a budget in place past Sept. 30, and if no deal is reached by then, the government would enter a partial shutdown on Oct. 1, and large spending cuts would automatically take place a couple months later.”
“The uncertain fiscal outlook is one more factor likely to tilt the Fed towards a 25 bps rate cut at its meeting later this month.”
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