Forex Flash: Republican statement calls for Senate to follow House – Nomura

Share | (Barcelona) - Nomura economists have noted that Republican Speaker Boehner and other leaders in the House have issued a statement calling again on the Senate to pass two bills which have already passed in the House.

These bills (H.R.5652: Sequester Replacement Reconciliation Act of 2012 and H.R.8: Job Protection and Recession Prevention Act of 2012; also see last week‟s H.R.6684: Spending Reduction Act of 2012 which passed the House) extend all of the Bush tax cuts and implement spending cuts proposed by the House Budget Committee under the leadership of Chairman Paul Ryan.

The team note that Senate Majority Leader Harry Reid has opposed this approach in the past and thus, in their opinion, it is extremely unlikely that the Senate will pass these bills as they are. They feel that Reid has indicated that he is prepared to bring legislation addressing the fiscal cliff to a vote in the Senate, but only if there is a realistic prospect of passage in the House.

Boehner´s statement indicated that the Republican leadership in the House is prepared to respond if the Senate passes any legislation relating to the fiscal cliff, but there was no indication of what sort of deal they would be prepared to sort out. The Nomura team see the bottom line as that there remain significant hurdles to pass legislation of substance in both the Senate and the House with the limited time remaining in the lame duck Congress. They remain sceptical and maintain that the most likely outcome is that we will "go over the cliff" - that is, there will be no substantive moderation of the fiscal cliff policies before year-end.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Forex and Currencies

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