The United States could find itself in default “from June 1” if an agreement is not reached between Republicans and Democrats to raise the debt ceiling
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Surprising move by the Australian central bank, which surprised the markets today by raising the interest rate by 25 basis points when operators were expecting a prolonged pause for reflection: for the institution, inflation in the country is still too high, they could further increases may be needed to bring it back to an adequate level. At the end of the policy meeting in May, the Reserve Bank of Australia therefore raised rates to 3.85%, stressing that “further” tightening may be needed to ensure that inflation returns to its target within a reasonable time frame.
Markets had been betting heavily on a stable outcome, as core inflation had fallen a little more than expected and the economy had not yet fully felt the past RBA tightening. Investors reacted by pushing the Australian dollar up 0.9% to $0.6687, while three-year bond futures fell 16 ticks to 96.85.
Back to 3% only in 2025
“Inflation in Australia is past its peak, but at 7% it is still too high and it will still be some time before it gets back into the target range,” the governor said. Philip Lowe. “Given the importance of bringing inflation back to target within a reasonable timeframe, the Council considered that a further hike in interest rates was warranted” at the time. Domestically, last week’s long-awaited first-quarter consumer price data confirmed that inflation has eased from a 33-year high, but is expected to return to 3% – the top of the target range for the Rba of 2-3% – only in mid-2025.
Meanwhile, the International Monetary Fund has raised its forecasts for Asia-Pacific, stating that the region’s growth will be driven mainly by the recovery of China and the “resilient” growth of India. This comes as the rest of the world braces for slower growth due to tight monetary policy and Russia’s invasion of Ukraine.
The IMF expects Asia-Pacific gross domestic product to expand 4.6 percent this year, up 0.3 percentage points from its October forecast, according to the May Regional Economic Outlook released today. The region’s two largest emerging market economies are expected to contribute about half of global growth this year.
“Asia and the Pacific will be the most dynamic regions in the world in 2023, mainly thanks to the positive outlook for China and India,” the IMF said in its report. “The two largest emerging market economies in the region are expected to contribute around half of global growth this year, while the rest of Asia and the Pacific will contribute a further fifth. Nationwide, the organization raised its growth forecasts for China, Malaysia, the Philippines and Laos to 5.2%, 4.5%, 6% and 4 percent, respectively.
USA at risk of default “from June 1st”
The month of May that has just begun also highlights the risk of default for the USA. On Monday 1, US President Joe Biden invited House Speaker Kevin McCarthy and the other main Republican and Democratic leaders in Congress “to a meeting at the White House on May 9” to discuss the debt ceiling. Indeed, the United States could find itself in default “from June 1” if an agreement is not reached between Republicans and Democrats to raise the debt ceiling, as also warned by US Treasury Secretary Janet Yellen.
As leader of the narrow Republican majority in the House, McCarthy has primary control over US budgetary matters. However, Biden made it clear that he will not accept the speaker’s current proposal to allow the extension of the US debt limit only in exchange for deep cuts in spending on programs that Democrats say are vital to Americans. In addition to McCarthy, Biden also invited to the meeting – the White House announced – the Democratic House Minority Leader Hakeem Jeffries, the Democratic Senate Majority Leader Chuck Schumer and the Republican Senate Minority Leader Mitch McConnell.
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