Impact of US budget deal mostly ‘psychological’

The budget agreement reached by congressional Democrats and Republicans would provide only a modest boost to the US economy. The psychological effect is likely to be a lot greater.

After a near default on the government’s debt in 2011, a 16-day federal shutdown in October, and plenty of political turmoil in between, Congress may finally be moving to ease the gridlock that has burdened the economy for three years.

The deal, which still must pass the House and Senate, is “a signal of a little less acrimony in Washington” before the next skirmish, raising the nation’s borrowing limit, said Michael Feroli, chief US economist for JPMorgan Chase.