The US could soon reach a new debt ceiling as early as mid-January

“At this time, the Treasury Department will have to take extraordinary measures,” she said in the letter to Republican House Speaker Mike Johnson and other lawmakers.

The debt ceiling was last raised in mid-2023
Yellen called on the US Congress to take action to protect “confidence” in the country and its “creditworthiness”. The debt ceiling is the legal limit on the amount the U.S. government can borrow to meet its obligations. The last suspension took place in June 2023, but this period ends on January 1, 2025.

This means that a new limit will be set on January 2, equal to the amount of debt issued by the Treasury. However, if the US reaches this new limit, further action will likely prove controversial; the issue of the increase has been a source of political tension for years.

The US is still solvent thanks to “extraordinary measures”.
The “extraordinary measures” mentioned by Yellen allow the Treasury Department to continue financing government activities. But if the debt ceiling is not raised again or suspended before the Treasury Department’s options are exhausted, the United States risks a default with far-reaching consequences for the world’s largest economy.

According to Yellen, the US will not reach the limit immediately after the suspension ends. According to the Minister of Finance, this is because the country’s outstanding debts are expected to decrease by approximately $54 billion (51.75 billion euros) on January 2 due to the repayment of securities.