Wrangling of debt limit continues…

Wrangling of debt limit continues

Wrangling of debt limit continues

Rating agency Fitch has mentioned this week the importance it attributes to the way they handle Republicans and Democrats continue to wrangle regarding raising the long-term debt limit.

President Barack Obama called the Republicans in congress to increase the country’s debt limit without preconditions, and emphasized that another conflict regarding fiscal issues, may lead to an extreme response of the financial markets.

In addition to that, Obama said that the Republicans shouldn’t expect a “ransom” in the form of spending cuts for their agreement to raise the debt limit.

The White House stated that it has no backup plan to pay the government’s bills so the meaning of the congress not raising the debt limit is leading the nation into default.

During the weekend, Republicans announced that on Wednesday they would vote for a temporary increase of the debt limit, and emphasized that raising the long-term debt limit would be possible only if the government performs an equivalent amount of spending cuts.
More they mentioned is that it seems like Washington elites haven’t yet learned the lesson of the last fight over the debt limit in August 2011, when the Republicans and Democrats hesitancy eventually damaged the business confidence.

Most of the data published this week was quite encouraging.

The recovery trend in the real estate market continues, jobless claims fell sharply, and private consumption increased at a sharper rate than expected in December.

Nevertheless, we negatively note the rising pessimism reflected by the expectation surveys regarding the future of the American industry and the drop recorded in the Consumer Confidence Index.
Regarding U.S. monetary policy, Fed Chairman Ben Bernanke spoke at the University of Michigan and did not say that the Fed intends to terminate or slow down bond purchases.

Bernanke emphasized that the double role given to the Fed (stabilizing inflationary pressures while supporting the labor market) justifies using aggressive monetary measures.

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