Two top Federal Reserve officials on Monday warned that failing to raise the US debt ceiling would have catastrophic consequences as Republicans in the Senate blocked a bill to increase the borrowing limit and stave off a government shutdown.
John Williams, the president of the Federal Reserve Bank of New York, said the US central bank would be unable to mitigate the impact of a potential default on the government’s debt. The Bipartisan Policy Center, a Washington think-tank, estimated last week that the US government could default on its obligations as soon as mid-October if the debt ceiling is not raised.
Williams warned reporters of the risk that investors could become “extremely nervous” and think “I’ve got to get out of things”, which he said could lead to an “extreme kind of reaction in markets”.