The central bank is buying $85 billion of Treasury and mortgage debt a month to spur economic growth and has said it will continue to do so until it sees a “substantial” improvement in the labor market. It has also pledged to keep its target rate for overnight loans between banks near zero as long as unemployment is above 6.5% and inflation isn’t forecast to exceed 2.5%.
President Barack Obama on Feb. 4 signed legislation temporarily suspending the $16.4 trillion debt limit through May 18.
In today’s statement, Treasury said it can use “extraordinary measures” to meet its obligations and to stay under the ceiling “for a period of time after May 19.”
“If Congress fails to increase the debt limit by May 19, Treasury can use extraordinary measures to create additional borrowing room,” the department said in today. “We will provide greater clarity at a later date regarding how long extraordinary measures will allow Treasury to continue to borrow.”
The House Ways and Means Committee April 24 passed a measure intended to ensure that U.S. government bondholders continue to be paid and that Social Security benefits aren’t interrupted even if a stand-off over raising the borrowing cap causes a cash crunch.