Videos | July 6, 2011

July economic update 2011

The US breached its "debt ceiling" in May. Find out the next step - and details of the potential fallout.


High borrowing by the United States is putting the influential country under pressure, says ING Commercial Banking chief international economist Rob Carnell. Carnell says the US breached its “debt ceiling” in May. He explains the potential fallout in the latest economic monthly update video.

US AAA credit rating “at stake”
Carnell says the US negotiators have until 02 August 2011 to reach agreement on a medium-term deficit reduction plan. “At stake is the US AAA sovereign credit rating,” says Carnell. But he adds that the ultimate payment of debt was not in serious doubt “just the timing”, so “this is unlikely to be as catastrophic as a potential Greek default”.

Improving confidence
The European Central Bank’s tightening stance remains (with further hikes likely before the end of the year) but central banks in the US and United Kingdom “are not expected by markets to start their tightening cycle for a year or more”. But Carnell says improved activity and better market conditions are likely to see investors bringing forward expectations for rate hikes from the US Federal Reserve and the Bank of England.

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