Washington: Federal Reserve Chairman Ben Bernanke on Monday urged US Congress to lift the country's borrowing limit before the Treasury runs out of maneuvering room to avoid a potential default on US debt.
Bernanke, speaking at an event sponsored by the University of Michigan, said that not raising the debt ceiling is like a family, which is trying to improve its credit rating saying, 'Oh, I know how we can save money, we won't pay our credit bills'.
In a wide-ranging question and answer session, Bernanke painted a cautiously optimistic outlook for US growth but gave no clear hints on when the Fed would curb its aggressive bond purchases, despite speculation that it will halt this year.
He also chided Congress for casting doubts over the country's commitment to pay its debts, echoing remarks by President Barack Obama earlier in the day.
"It's very, very important that Congress takes the necessary action to raise the debt ceiling to avoid a situation where our government doesn't pay its bills," the Fed chief said.
The United States scraped up against its USD 16.4 trillion debt ceiling on December 31 and is now employing special measures to meet its financial obligations. The Treasury Department said those steps could be exhausted by mid-February.
Republicans want to use the need to increase the nation's borrowing authority as leverage to push for deep government spending cuts. Obama told a news conference that he would not negotiate over the borrowing limit.
US leaders agreed at the beginning of January to extend tax cuts for all American families earning less than USD 450,000 a year to avoid a portion of a "fiscal cliff" of policies that Bernanke had said would likely tip the economy into recession.
But lawmakers must still navigate the debt limit as well as thrash out a deal over drastic automatic spending cuts that were postponed until March 1, and the Fed's influential chairman warned that a fiscal impasse could still hurt the recovery.
"We're not out of the woods because we are approaching a number of other fiscal critical watersheds coming up," Bernanke said.
With Agency Inputs