U.S. Reaches Debt Limit, Causing Congressional Tension
The U.S. Treasury Department estimated that the $31.4 trillion U.S. debt ceiling would be hit as early as Thursday, January 19th. Following the announcement, Treasury Secretary Janet Yellen informed congressional leaders that extraordinary measures would be taken to defer the default until June 5th. With Kevin McCarthy recently elected as House Speaker, Republicans are expected to oppose raising the debt ceiling until Biden and the Senate agree to cut spending.
The latest inflation data continues to be positive, with the Producer Price Index revealing a decline of 0.5% in final demand, following a 0.2% increase in November. Additionally, the decrease in initial jobless claims highlights that the labor market remains robust. Despite the exceptionally low unemployment rate, there has also been a trend of declining inflation, which has led many Federal Reserve officials to revise their views on the likelihood of a harsh economic recession. Notably, Vice Chair Fed President Lael Brainard remarked on Thursday that the likelihood of a "soft landing" in the U.S. appears to be increasing.