Federal Reserve Chair Jerome Powell issued a warning to Congress during a Wednesday press conference: raise the debt ceiling or risk widespread defaults and their potential ripple effects. Powell expressed that the central bank can't protect the economy from the consequences of failing to act, as the current impasse in congressional negotiations regarding raising the debt limit has already reached its limit.
The Treasury Department has projected that, if the debt limit isn't raised in the near future, they would be forced to begin defaulting on their obligations as soon as June. Several unorthodox proposals have been discussed, including the issuance of a trillion-dollar coin and the Treasury directing the Fed to buy up troubled government debt.
In response to the proposals, Powell shared that the Fed are the Treasury’s fiscal agent and declined to comment any further. Surprisingly, he also acknowledged that the bank’s efforts to combat inflation, which include reducing its holdings of