Bloomberg News reports that the US economy is already bearing a burden of high-interest rates that has taken place in decades. Americans have curbed access to credit, and the cap on government spending and the debt deal to increase the debt limit has proved to be an additional burden for the economy.
More about the Deal
The deal chalked out by the President of the United States and the House Speaker, Kevin Mc Carthy, assumes that Congress will pass it in the coming days and has worked out to avoid the worst. The deal aims at keeping at bay the worst-case scenario wherein there might be a default in payment which is likely to collapse the financial setup. However, such an instance could also add to the risks of a meltdown in the world’s largest economy.
US Growth Lately – What has been the Status?
In the latest quarters, federal spending has fostered US growth amidst an environment of headwinds which also includes a plunge in the areas of residential construction. And the debt limit deal will likely further dampen this impetus. Two weeks before the debt limit deal, the Bloomberg Survey showed that the chances of a recession in the coming year might be 65%.
The Scenario in the Financial Market
The US stock futures on Monday advanced in the morning trade in Asia. The contracts related to S&P 500 index were up 0.4% as of 9:02 AM in Tokyo. The trading of Treasuries remains closed since Memorial Day was a holiday. It was found ticking at a lower figure and sent the indicated yield up.
Although there has been a hike of around 5% of the Federal rate since March last year, the economy in the US proved to be resilient to date. The unemployment rate is at an all-time low in half a century, at 3.4%. The high demand for workers has helped attain the state. Consumers continue to have savings in excess from the pandemic, as per a study by the San Francisco Fed.
According to Bloomberg News, the deal chalked out by lawmakers to enhance the debt limit is good for the economy. It tries to stall a breach of the debt limit. If a breach, it signaled a recession. The government is paying the bill on time.
