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The FOMC minutes and the Debt Limit

The FOMC minutes and the Debt Limit

While headlines in Washington are dominated with the drama of Washington’s spending, the Fed will be releasing the minutes of its last FOMC meeting. This could provide markets a little break, as attention focuses on what’s coming after the debt ceiling issue.

The current assessment by the US Treasury is that it will run out of money on June first (or close thereafter), in the so-called “x-date”. By that time, the debt ceiling must be resolved. The Fed won’t meet until two weeks later, meaning that the interpretation of the Fed minutes won’t include the current issues that are getting all the headlines.

So, default?

It is important to clarify a few issues regarding the debt ceiling. The first is that an important part of the negotiating tactics involves saying the deadline is sooner than it is – on both sides. The House has implied that it will take a minimum of a week for any agreement to be approved, increasing the urgency in finding an agreement. The White House (through the Treasury) has warned that the date is “as soon as” June 1st, but not committing specifically as the last day possible. So, the negotiations could go on to the very “limit” and even beyond, which could keep riling up the markets.


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