"We've made tremendous progress. Perhaps tomorrow will be a bright day."
- Harry Reid, Senate Majority Leader
Amid growing pressure from a likely economy-devastating default and continuous talks between Senate leaders, everyone forgot about Bernanke's speech, which in fact did not provide any bold statements. Fed's Chairman only claimed that central bank independence is crucial to the credibility needed to curb the inflation. According to Bernanke, independence leads to such benefits like low inflationary pressure, reliable inflation expectation, increased policy credibility as well as a more stable economic growth. However, he refused to discuss the outlook for the United States and refrained from any remarks regarding the monetary policy.
Meanwhile, racing the clock, U.S. politicians are getting closer to a proposal to increase the Treasury's borrowing authority and to reopen the government after 14 days of shutdown. Despite some progress, there are still doubts that Harry Reid's and Mitch McConnell's proposal would be passed in the House of Representatives, where conservatives are insisting on further spending limits. Despite the fact the White House is running out of time, it seems that markets underestimate the threat of the potential default, as the S&P advanced 0.4% amid signs of a Senate deal. Nonetheless, a failure to raise the debt ceiling would leave the United States unable to pay its bills leading to a possible default, and according to Obama there is a `good chance' of default.
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