WASHINGTON — Treasury Secretary Janet Yellen said Friday that the United States is likely to have enough reserves to push back a possible default until June 5.
“We now estimate that the Treasury will not have sufficient resources to meet the government’s obligations if Congress has not raised or suspended the debt ceiling by June 5,” Yellen wrote. in a letter to the Speaker of the House, Kevin McCarthy.
Friday’s new date provided much-needed leeway for negotiations between the White House and congressional Republicans that appeared to be closing in on a compromise deal on Friday to raise the debt ceiling for two years.
The last time the so-called “X date” was updated was May 1, when Yellen told Congress that the United States had enough cash to meet its obligations through “the beginning of June, and potentially as early as June 1st.
Friday’s letter marked the first time since Yellen began sending regular updates to Congress in January that the secretary has not cautioned the date with a phrase like “as soon as.”
Instead, Yellen explained that the Treasury would make more “$130 billion in scheduled payments in the first two days of June,” leaving the agency with “an extremely low level of resources.”
“During the week of June 5, the Treasury is expected to make approximately $92 billion in payments and transfers,” Yellen continued, and “our projected resources would be insufficient to meet all of these obligations.”
To underscore how treasury reserves had fallen, Yellen said the agency was forced to roll out an obscure measure on Thursday to transfer $2 billion from a civil service pension fund to the main government institution. government loan, the Federal Financing Bank.
This decision was necessary because “the extremely low level of remaining resources requires that I exhaust all extraordinary measures available to avoid not being able to meet all government commitments,” Yellen wrote.
Markets closed higher on Friday, buoyed in part by optimism that there would be a deal passed by the House and Senate and signed by the president by June 1.
But as talks dragged on this week with little more than vague declarations of “progress” from those involved, optimism faded that a deal could be struck by the end of Friday. .
Officials said Friday was widely seen as the last possible day to reach an agreement and that there was enough time to turn it into legislation, pass it in the House, and then pass it in the Senate before the previous ” X-date” of June 1st.
Yellen’s new date came amid growing concerns around the world over the United States’ credit rating.
On Wednesday, financial rating agency Fitch announced that it had placed the United States’ triple-A status on “negative watch”.
On Friday, in a preliminary report from the International Monetary Fund annual evaluation of the United States, the officials wrote that “tension on the federal debt ceiling could create additional, entirely avoidable, systemic risk for both the United States and the global economy.”
If the United States technically defaults, even for a few days, it could drive up interest rates and undermine confidence in the U.S. dollar. Economists note that America’s adversaries, and especially Russia and China, are watching the current impasse over the debt ceiling with pleasure, convinced that an erosion of confidence in the US dollar would be to their advantage. .