WASHINGTON, May 2 (Reuters) - A top White House economist on Tuesday said Federal Reserve interest rate hikes aimed at curbing inflation were having a negative impact on the banking sector, and warned Republicans against worsening the situation with their debt ceiling threats.
Heather Boushey, a member of the White House Council of Economic Advisers, told Reuters that Republicans should not be "playing games" with the U.S. economy.
"The economy remains, it's been strong. You don't want to be pushing it off of the course that it's on," Boushey said. "The Fed is raising interest rates in the hope of reducing inflation. That is having this negative effect on the banking sector. Why would we add to that?"
Boushey said Congress could easily remove the risk of default by raising the debt ceiling, while the broader issue of interest rates and their impact on bank assets was a far more complicated question that no single entity had the power to solve.
Boushey's comments come as Fed governors are gathered for a two-day policy meeting that analysts expect to result in a 25-basis-point increase in the federal funds rate on Wednesday.
The White House on Tuesday said President Joe Biden will not negotiate over the debt ceiling during his meeting with four top congressional leaders on May 9, but he will discuss starting "a separate budget process" to talk about spending priorities.
Biden on Monday summoned the four Senate and House of Representatives leaders -- two fellow Democrats and two Republicans -- to the White House next week, after the U.S. Treasury warned the government could run short of cash to pay its bills as soon as June 1.
