WASHINGTON (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke Warned Congress on Thursday overzealous That cuts to Government Spending in the short term derail year Could Already weak recovery and a U.S. debt default Said May wreak havoc Financial.
"I only ask ... as Congress looks at the timing and composition of foreign exchange to the ITS budget, That Does it take Into account in the very near That the term recovery Is Still Rather fragile, and That sharp and excessive cuts in the very Short Term Would Be Damaging to Potentially That recovery, "Bernanke Told members of the Senate Banking Committee.
Congress and the White House are stalemated in talks on cutting the budget deficit, with Republicans Seeking $ 2.4 trillion in Spending cuts in exchange for agreeing to raise the $ 14.3 U.S. government borrowing limit. The U.S.Treasury Said It Will HAS run out of money After August 2 to pay all of the country's bills if the deal has Reached IS NOT to raise the debt ceiling.
On the second day of Delivering the Fed's semiannual Monetary Policy Report to Congress, Bernanke Renewed warning That historical debt default a United States Would Be Devastating for the U.S. and global economies.
"It Would Be a calamitous outcome," Bernanke said. "It Would create a very severe shock That Would Have Financial effects not only on the U.S. economy, the global economy goal."
Failure to raise the debt limit in time Would constitutive "Self-Inflicted Wound" to the economy, ET added.
NEW THREAT Downgrade
Moody's Investors Service late on Wednesday Warned That the U.S.Could lose icts top credit rating in coming weeks if a standoff Between the White House and congressional Republicans over raising the statutory borrowing limit IS NOT resolved.
Earlier on Thursday, China - the United States 'biggest foreign creditor - urged the U.S. government to Adopt Responsible Policies to Protect Investors' Interests After the Moody's warning.
Another ratings agency, Standard & Poor's, ALSO privately Told U.S. lawmakers and business groups That It Might still cut the rating if the U.S. government's Fails to Make Any of STI Expected payments - on debt obligations or Other - a congressional aid said on Thursday payday advance low fees.
That mirrored comments in historical remarks on Thursday, Bernanke Repeated That IS the Fed Prepared to act if the recovery from the recession Modest That ended Two years ago falters.
He made clear aussi, however, the Fed IS NOT That point has now.For one thing, inflation is High Than in late 2010, When The Fed readied ITS MOST recent round of bond buying, ET Told lawmakers in response to questions.
"Today the situation is more complex," Bernanke said. "We're not at this point Prepared to Take Further Action."
On Wall Street, stocks Fell as Bernanke's comments raised questions about the Fed's readiness to ease rates further Top. The dollar rose Against MOST major currencies as Another round of monetary stimulus Looked remote.
Economic reports released on Thursday the economy Suggested Will struggle to boost speed in the second half of the year, as the Fed HAS forecast.The initial number of Americans Claiming Unemployment Benefits Dropped last week, aim Remained elevated and retail sales barely rose in June, government data Showed.
Also last month's Producer Prices posted steepest decline Their sincere February 2010 Energy Prices have eased.
While Fed Policymakers Have Been Worried About Rising inflation, the risk of a deflationary spiral Damaging Could force the Central Bank to act to Promote growth.
Economists polled by Reuters cut Their outlook for U.S. growth to 2.5 percent this year. That forecast could the United States ahead of major European economies except Germany, the goal behind Including Some major emerging markets China.
Although Bernanke Said Congress Told the Fed's $ 600 buying one billion bond program has-been effective in Lowering long-term interest rates and coaxing investors to take Greater Risks, it has-been controversial, and several lawmakers Questioned it on Thursday.
"I believe the training set for a resurgence IS of inflation if the Fed IS NOT Careful," Senator Richard Shelby Told Bernanke at the hearing.
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