A top Federal Reserve official warned that failing to raise the US debt ceiling would have grave consequences as Republicans in the Senate blocked a bill to increase the borrowing limit and stave off a government shutdown.

John Williams, the president of the Federal Reserve Bank of New York, said on Monday that the US central bank would be unable to mitigate the impact of a potential default on the government’s debt.

Williams warned of the risk that investors could become “extremely nervous” and think “I’ve got to get out of things”, which he said could lead to an “extreme kind of reaction in markets”.

His comments were echoed by Treasury secretary Janet Yellen. In prepared testimony due to be delivered to the Senate banking committee on Tuesday, she implored lawmakers to raise the debt limit in order to avert what she said would be a “catastrophic event for [the]economy”.

The Bipartisan Policy Center, a…

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