(Bloomberg) — The cap on government spending in Washington’s deal to raise the federal debt limit adds a fresh headwind to a US economy already burdened by the highest interest rates in decades and reduced access to credit.
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The tentative deal crafted by President Joe Biden and House Speaker Kevin McCarthy over the weekend — assuming it’s passed by Congress in coming days — avoids the worst-case scenario of a payments default triggering financial collapse. But it also could, even if at the margin, add to risks of a downturn in the world’s largest economy.
Federal spending in recent quarters has helped support US growth in the face of headwinds including a slump in residential construction, and the debt-limit deal is likely to at least damp that impetus. Two weeks before the debt-limit deal, economists had calculated the chance of a recession in the coming year at 65%, a Bloomberg survey showed.
For Federal Reserve policy makers, the spending cap is a…
Article from finance.yahoo.com