Jul 20, 2011 – 4:21 PM ET | Last Updated: Jul 20, 2011 6:47 PM ET
By Kristina Cooke and Tim Ahmann
PHILADELPHIA — The U.S. Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government’s US$14.3-trillion borrowing limit looms, a top Fed policymaker said on Wednesday.
Philadelphia Federal Reserve Bank President Charles Plosser said the Fed has for the past few months been working closely with Treasury, ironing out what to do if the world’s biggest economy runs out of cash on August 2.
“We are in contingency planning mode,” Plosser told Reuters in an interview at the regional central bank’s headquarters in Philadelphia. “We are all engaged … It’s a very active process.”
Plosser said his “gut feeling” was that President Barack Obama and Congress will come to an agreement to increase the Treasury’s borrowing authority in time to avert a default on government obligations.
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