Differences over debt divide Washington

Finance | Reuters and Staff Reporter 23 Sep 2021

People with a range of interests were today following the results of a two-day US Federal Reserve meeting on its reduction of asset purchasing after the Democrats in the House of Representatives on Tuesday passed a bill to suspend the nation's borrowing limit until the end of 2022, sending it to the Senate where Republicans have vowed to block it.

If Republican senators stick by their refusal to support the measure Democrats will have to come up with a new strategy or quickly face the twin problems of a government in partial shutdown because of being unable to pay its bills and the risk of a default for the first time in modern history.

The Federal Reserve was expected to clear the way for reductions to its monthly asset purchases later this year and to show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing heavier on the economic outlook.

Fed policymakers have been handed a conflicting set of developments since late July. There have been signs of a slowdown in the services sector, a Covid-19 surge that has eclipsed that of last summer and weak job growth in August, and all alongside still-strong inflation. The situation has left Fed members in conflict among themselves about how to react.

And the US job market remains about 5.3 million positions short of where it was before the pandemic.

Many economists who responded to a Reuters poll said they expected the tapering of bond purchases to begin in December.

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