"US Government Shutdown Threat Escalates Amidst Post-Downgrade Fallout"

The threat of a US government shutdown looms as Congress left for an extended August recess without resolving conflicts over spending and social issues, raising the risk of a shutdown when federal funding runs out after September 30. Fitch Ratings' recent downgrade of US debt has emboldened Republicans to call for spending cuts. While the direct economic impact of a shutdown would likely be limited, it could complicate the Federal Reserve's policy making and potentially factor into their interest-rate decision in September. The shutdown could also dampen consumer spending, disrupt the labor market, and pose challenges for the US economy, which is already facing hurdles such as inflation and supply chain issues.