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US Fed Reserve chief calls on Congress to raise debt ceiling

Ben Bernanke warned that America’s huge federal budget deficit would have to be reduced, but didn’t indicate whether he supported taxation or spending cuts.

Image: AP Photo/M. Spencer Green

THE HEAD OF THE US Federal Reserve Ben Bernanke has warned that the US debt ceiling must be raised to avoid causing “severe disruptions in financial markets and the payments system”.

Speaking yesterday in Washington, Bernanke also said that US Congress needs to act quickly to reduce the US federal budget deficit, however he refrained from suggesting whether that could be done through increased taxation or spending cuts, the CS Monitor reports.

He said the refusing to raise the debt limit was the wrong approach to take on tackling the deficit. Bernanke warned that any delay, however short, in making payments on US debt would damage the dollar and raise doubts over US creditworthiness.

Earlier this month, ratings agency Moody’s warned that the US government could lose its sterling rating if Congress and the Obama administration fail to reach an agreement on raising the nation’s debt limit. The two sides have been locked in lengthy negotiations for months over raising the debt ceiling, which has to be approved by Congress. The US hit its debt ceiling of $14.2 trillion in May.

- Additional reporting by the AP

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