BANKING/ECONOMY/FEDERAL RESERVE/NATIONAL DEBT: “Central bankers have been looking forward for years to a moment when the world economy is growing steadily again, allowing them to unwind extraordinary monetary stimulus from global markets.
They are now in such a moment, but at the Federal Reserve’s annual retreat here over the weekend they found their attention turned to other challenges, including a possible leadership transition at the Fed next year and the risk of a government shutdown or debt-ceiling crisis in Washington next month.
Congress returns to Washington in September with just a few short weeks in which to raise the federal borrowing limit and authorize new funding to keep the government operating beyond Oct. 1. Signs of angst over the debt limit are beginning to rise in financial markets amid worries lawmakers won’t be able to close a deal on time. Treasury officials have urged Congress to raise the borrowing limit by Sept. 29.
‘What’s being discussed regarding the shutdown and the debt ceiling, we have to monitor very carefully,’ Dallas Fed President Robert Kaplan said in an interview on the sidelines of the conference. Fed governor Jerome Powell warned in a television interview that failing to raise the debt ceiling would be a ‘major shock to the economy,’ while Treasury Secretary Steven Mnuchin told reporters at a White House briefing Friday [8-25-17] he was ‘100% confident’ Congress would act in time.
Fiscal brinkmanship comes as the Fed is preparing to take the next step in its gradually unfolding plan to withdraw monetary stimulus from the economy. It has raised short-term interest rates four times since December 2015. Next month it is expected to announce it will start shrinking its portfolio of mortgage and Treasury securities by allowing some to mature without reinvesting the proceeds into new bonds.”
-Kate Davidson and Ben Leubsdorf, “Central Bankers Can’t Savor Their Stimulus Success,” The Wall Street Journal online, Aug. 27, 2017 01:02pm