The deal to suspend the limit on federal government debt until 2025 removes one of the obstacles to another Federal Reserve rate increase.
Federal Reserve officials regarded the possibility of crossing the “x-date”—the point at which the government would no longer have enough available funds to pay bills as they come due—with sufficient alarm to forestall a hike even if other economic data were supportive of higher rates. Monetary policy, in other words, would have become a captive of fiscal policy.
Perhaps. As Yogi Berra might have said, events are hard to predict, especially if they haven’t happened yet. A year from now it seems very likely that the economy will be in a recession or close to one . Unemployment is likely to be higher in June of 2024 than it is today. The public may be less concerned about government debt levels and inflation if the economy is shedding jobs, incomes are plunging, and output is falling.
. Playing the role of budgetary bean counters is not going to inspire many votes. It risks distracting from a more important agenda centered around economic nationalism and growth.The most direct macroeconomic impact of the debt deal is likely to come from the agreement tothis summer. The average monthly bill before the pandemic was $393 per borrower, according to data from the Federal Reserve. Some.
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