What happens now the US has hit the debt ceiling?

BBC, By Natalie Sherman

Business reporter, New York

The US has hit its debt limit, with the Treasury Department now taking measures to prevent a potentially devastating default.

Reaching the debt ceiling means the government is not allowed to borrow any more money – unless Congress agrees to suspend or change the cap, which currently stands at almost $31.4tn (£25.4tn).

Typically that is what happens.

The stand-off on the issue in 2011 prompted the S&P credit ratings agency to downgrade the country’s rating – a first for the US.

Government analysts have estimated that delays that year caused the cost of borrowing for the US Treasury to increase by at least $1.3bn, as investors demanded higher rates due to the uncertainty.

Analysts are already expecting debate on the issue this year to make financial markets jumpy.

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