The US will hit its debt ceiling on Thursday, Yellen warned Congress

U.S. Treasury Secretary Janet Yellen speaks at the Financial Stability Oversight Committee (FSOC) meeting at the Treasury Department, Friday, Dec. 16, 2022, in Washington, DC, U.S.

Ding Shen | Bloomberg | Good pictures

Treasury Secretary Janet Yellen announced to Congress on Friday that the US will achieve that Statutory credit limit Next Thursday.

After that, the Treasury Department “will begin to take some extraordinary steps to prevent the United States from defaulting on its obligations,” Yellen wrote in a letter to House Speaker Kevin McCarthy, R-Calif.

The Treasury is “not currently able” to estimate how long those emergency measures will allow it to pay U.S. government obligations, he wrote, adding that it is “unlikely that the money and extraordinary measures will run out by early June.”

“I respectfully urge Congress to act immediately to protect the full faith and goodwill of the United States,” Yellen wrote.

Yellen’s announcement on Friday effectively starts the clock on how long the Fed can continue to make interest payments on its debt.

The Treasury secretary’s so-called extraordinary measures could technically free up billions of dollars earmarked for other purposes but not yet spent.

That could extend the clock by weeks or months while Congress rolls out a bill to raise the debt ceiling.

A senior White House official told CNBC that the White House plans to cut a deal with Congress to raise the federal debt ceiling after the mid-April deadline for income tax filings. The official said the White House will not have enough details to negotiate a deal until it sees the level of income tax receipts.

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But the debate over raising the debt ceiling is expected to be especially fraught this year in light of the new Republican majority in the House of Representatives.

McCarthy has made little secret of the fact that Republicans are demanding massive spending cuts in the federal budget in exchange for agreeing to raise the debt ceiling.

This is breaking news. Check back for updates.

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