Analysts believe that there is a 40% chance of a government shutdown at the end of this week, as the House of Representatives intends to vote on Tuesday.

Written by Victor Rekletis

The House Rules Committee is scheduled to consider Speaker Johnson’s proposal late Monday afternoon, and the full House is expected to vote on it on Tuesday.

A divided Washington could lead to a partial government shutdown after midnight Friday, but analysts are optimistic for now that the Republican-run House and Democratic-controlled Senate will be able to agree on a stopgap funding measure that prevents a shutdown.

Negotiations are unfolding this week between US lawmakers after ratings agency Moody’s lowered its credit rating outlook for the country to negative from stable at the end of last week, citing in part its doubts about the federal government’s ability to implement effective fiscal policies.

Over the past weekend, House Speaker Mike Johnson, the Louisiana Republican who became speaker just three weeks ago, unveiled a two-step measure to avoid a shutdown. His “graduated continuing decision” aims to extend government funding for some agencies and programs until January 19, and for others until February 2.

The House Rules Committee is scheduled to make its decision late Monday afternoon, and the full House is scheduled to vote on it Tuesday. The Biden White House criticized Johnson’s plan as a “not serious proposal,” while Chuck Schumer, a New York Democrat, of the Senate majority, promised last week to “continue talking with Republicans about finding a way forward to avoid a shutdown that both sides support.” .

Here are some assessments from analysts Major US stock indexes SPX DJIA COMP were mostly higher on Monday, as investors braced for key inflation data and gauged the possibility of a close.

The federal government is funded through midnight Friday because former House Speaker Kevin McCarthy worked with House Democrats to pass a 45-day funding bridge on September 30. McCarthy’s maneuvers angered some hard-line Republicans, who then led a campaign to oust him.

— “We still think the probability of a government shutdown on November 18 is 40%, which is higher than other observers in Washington, but still unlikely. … Our sense is that there is a honeymoon between Speaker Johnson and his caucus “It’s coming to an end.” End, but we think he still has enough runway to get a “clean” continuing government funding resolution through January through the chamber. …At the highest level, we do not believe this closing should be viewed as a material event for investors because it does not touch the third line of the debt ceiling and any lost economic activity will be made up after the inevitable deal. – Isaac Boltanski and Isabel Pandorov of BTIG, in a note

From the MarketWatch archives (September 2023): What stock investors need to know about US government shutdowns

– “We continue to see the odds of a closure this week as relatively low (less than 40%) and expect some Democrats to support the package, although the outlook remains ambiguous. The rapid two-step response reinforces our view that in the likely “Johnson has the good faith and credibility on the right to promote a compromise that Democrats also support. However, he is postponing the bet until the first quarter of 2024, rather than resolving the issue. Showdown over spending levels and priorities.” – Benjamin Salisbury of Hite Capital Markets, in a note

– “(We) don’t expect the government to shut down this weekend. …Johnson’s CR, while not delivering the spending cuts fiscal hawks want, gives the House Freedom Caucus (HFC) a win in at least some It’s about the details of the funding process. Leadership-driven, end-of-year sweeping bills have become a bogeyman of sorts for conservatives, who hate both loud headlines and missed opportunities to have input into pushing funding cuts and policy riders. Next year’s funding debate, making It eliminates the opportunity to impose such a catch-all on them on a Christmas deadline. –Andrew Lucai of Beacon Policy Advisors, in a note

From the MarketWatch archives (September 2023): Here’s how the US government shutdown will affect you, from food aid to getting your passport

-Victor Reklaitis

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