CHICAGO – Uncertainty over the so-called U.S. fiscal cliff threatens to cause "some real crazy activity" on markets if Congress fails to act by the year-end, Terry Duffy, executive chairman of the CME Group , said on Thursday.
If Congress cannot reach a deficit-reduction deal by the end of the year, it will automatically trigger big spending cuts and tax increases in 2013. This "fiscal cliff" would hit the still-recovering U.S. economy hard.
Some market participants expect Congress to agree on temporary fixes that let a larger deal on tax reform get done in 2013.
However, "I'm not convinced that everyone is going to play nice and 'kick the can down the road'," said Duffy, speaking at a futures industry event in Chicago.
Next week's U.S. elections are adding to uncertainty over whether Congress will be able to agree on a deal to delay reform, he said. Members of the Tea Party movement may push for larger and more immediate changes, and the risk is that the government could shut down, Duffy said.
The CME is the world's largest futures exchange.
(Reporting by Karen Brettell; Editing by Dale Hudson)