US: Debt deal to December – ING

James Knightley, Chief International Economist at ING, explains that in a surprise move, President Trump has agreed to a Democrat proposal to extend funding to government until December 15, removing near-term fears over government shut-downs

Key Quotes

“In a move that has angered senior Republicans, President Trump agreed to back a proposal by Democrat members to a three month deal to raise the debt ceiling, which will also ensure that aid related to Hurricane Harvey (and further help if Hurricane Irma hits) can be delivered in a timely fashion. However, it still needs to be voted on and while Republicans will likely acquiesce in the main, it means that there will have to be another vote on raising the debt ceiling later this year.”

“This has reduced fears over a potential government shutdown later this month, but really merely delays the issue. President Trump has promised comprehensive tax reforms and with other legislation set to be debated, such as how to replace the “Dreamers” programme, there is a heavy agenda. Nonetheless, with immediate tensions in the bond market surrounding the debt ceiling and the small possibility of default, it should pave the way for the Federal Reserve to formally announce the balance sheet reduction programme later this month.”