US may default on debt as soon as June 1, Treasury Secy Yellen reaffirms

Washington [US], May 16 : Treasury Secretary Janet Yellen on Monday (local time) reaffirmed that the US could default on its obligations in early June if Congress doesn't act, reported CNN.

"With additional information now available, I am writing to note that we still estimate that Treasury will likely no longer be able to satisfy all of the government's obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1," Yellen wrote to House Speaker Kevin McCarthy.

The looming deadline is keeping the pressure high on House Republicans and the White House to bridge their differences and address the debt ceiling in the coming days. President Joe Biden is expected to meet again on Tuesday with McCarthy and other top congressional leaders, reported CNN.

Earlier, Yellen based on April tax receipts and current spending levels predicted the US could run short of cash by early June.

Notably, the collapse of a few regional banks in the US, which started with Silicon Valley Bank, has sent ripples across the global banking industry and posed fears of a contagion effect across economies.

Low-interest rates have also squeezed banks' net interest margins, prompting them to cut operational costs elsewhere.

In the US, regulators have shut down and sold three mid-size US banks since the beginning of March - Silicon Valley Bank, Signature Bank and First Republic. The failures are the biggest to hit the US since the 2008 financial crisis.

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