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FX.co ★ US government shutdown would hardly come as bombshell

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Humour sur le Forex:::2023-10-16T12:45:09

US government shutdown would hardly come as bombshell

The growing likelihood of another shutdown in the US seems to be of secondary importance on the back of full-scale military conflicts around the world. Nevertheless, market participants should not rule out the scenario that the US government might run out of cash from November 17. To help investors assess risks, analysts predict the consequences of this hypothetical event.

Wall Street certainly arouses concerns about the longer-term credit rating of the US. Rating agency Moody’s warns that US creditworthiness is at stake. The scenario of the shutdown is not the worst risk in the modern economic and political landscape compared to stubborn inflation and simmering geopolitical jitters. A partial shutdown could end up in a downgraded credit rating but would hardly influence the US economic growth. The damage inflicted by a shutdown would be offset quickly after its completion. A more serious scenario is that US legislators would fail to agree on the budget funding and the question would remain open indefinitely. In this case, the impact on the economy would be devastating.

Previously, bi-partisan Congress could not solve the government budget for the new fiscal year starting from October 1, 2023. The feud between the parties posed the threat of the government suspension. Democrats wanted to expand funding government programs whereas Republicans, on the contrary, aimed to cut some spending bills. Eventually, lawmakers came to a common denominator and passed a stopgap funding bill.

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