Exclusive-White House: Fed interest rates having negative effect on banking
Reuters
Published May 02, 2023 04:18PM ET
Updated May 02, 2023 07:11PM ET
By Andrea Shalal
WASHINGTON (Reuters) -A top White House economist on Tuesday said Federal Reserve interest rate hikes aimed at curbing inflation were having a negative impact on the banking sector, and warned Republicans against worsening the situation with their debt ceiling threats.
Heather Boushey, a member of the White House Council of Economic Advisers, told Reuters that Republicans should not be "playing games" with the U.S. economy, by pegging an increase in the $31.4 trillion debt limit to budget cuts.
"The economy remains, it's been strong. You don't want to be pushing it off of the course that it's on," Boushey said, urging Republicans to back a debt ceiling increase without conditions. "The Fed is raising interest rates in the hope of reducing inflation. That is having this negative effect on the banking sector. Why would we add to that?"
Boushey said Congress could easily remove the risk of default by raising the debt ceiling, while the issue of interest rates and their impact on bank assets was a far more complicated question that no single entity had the power to solve.
"This is terrible. It's scary. We should not be be playing these kind of games with the U.S. economy and with the full faith and credit of the United States," Boushey said. "We need to be focused on how we're going to keep the economy moving."
Boushey's comments come as Fed governors are gathered for a two-day policy meeting that analysts expect to result in a 25-basis-point increase in the federal funds rate on Wednesday.
House Republicans passed a bill to raise the debt limit last week that includes steep cuts to spending from healthcare to air-traffic controllers, which the Democratic-controlled Senate and President Joe Biden say they will not approve.
Biden on Monday summoned the four Senate and House of Representatives leaders - two fellow Democrats and two Republicans - to the White House next week, after the U.S. Treasury warned the government could run short of cash to pay its bills as soon as June 1.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.