“Debt Ceiling Debate Intensifies Amidst Economic Struggle”

US GDP Growth Slows, Debt Ceiling Concerns Loom, and First Republic Bank Shaken

Mark Rizzn Hopkins reporting.

The US economy’s growth rate for Q1 2023 came in at 1.1%, much lower than analysts’ expectations of a predicted 1.9%. There is now a growing fear of stagflation. This quarter’s GDP was significantly slower compared to the previous two estimates, which reported growth rates of 2.6% and 3.2%, respectively. People are getting anxious for the weeks ahead, with the FOMC meeting on May 3, anticipated to raise rates by 25 basis points – which takes the federal funds rate to 5.00%.

Debt Ceiling Debate Creating Volatility and Disruption

The US Government Department of Treasury defines debt limit as “The debt limit is the total amount of money that the United States’ government is authorized to borrow to meet its existing legal obligations, including social security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments.” Congress has raised the debt ceiling 78 times based on data spanning 1960, with the Democrats having raised debt the cap 29 times and Republican, 49 times. Currently, Democrats and Republicans are not in agreement.

Growing uncertainty in Wall Street is a growing fear as a potential failure to reach a timely agreement yanks investors to take precautions while both parties chat out their policies. According to analysts, both parties hold different views on the topic. While some want the “debt ceiling” raised without any additional conditions, others insist on slashing costs while increasing the debt proportionally. The tension around the “debt limit” and “kick the can down the road” means investors might pull everything out.

As much as investments could initially escalate, it is essential to highlight the possible impacts of Congress reaching an agreement increasing the debt ceiling; discussions are active until further either by raising recession concerns or limiting assets circulation and other things.

The Potential for First Republic Bank Exodus

First Republic Bank recently reported a severe deposit flight to the extent that it’s struggling to keep up. Although some consider it an expected liability increase percentage when customers take their hard-earned cash out, others raise questions over interest charges soaring over 47% higher than last year to over £106.6 billion. However, as the federal funds rate for is touching on 5%, things could spiral notoriously out of control resulting in serious problems from deposit withdrawals.

Brexit Divide and Its Effects

Sadly, policymakers in the United Kingdom are getting a lashing. In Chief Economist Huw Pill’s most recent remarks, he implied Britons’ willingness to win more chips and bigger hands accentuates its painful hyper-inflationary wave. Should this analysis hold sustained, then lowering real incomes for some might turn inevitable. Soaring fuel prices and surging gas prices are tainting a mistaken lack of confidence in the UK economics.

It was also not good news these last days for Deputy Governor Ben Broadbent when he got immense criticism in his handle of out-of-control inflation saying that the money printing during COVID results from outcomes beyond their control.

The Bank of Japan recently proposed and later adopted an all-inclusive approach to stimulate the maintenances of yield curve on the Yen. It created chaos as levels dropped dramatically causing an upsurge in bonds with the USD.JPY seen falling drastically. Experts have warned this tactic might be risky over the long haul since tempering too much might entirely expose certain types of players to risk.

[h/t James Van Straten]