In the long-run, Americans need to spend less, save and invest more, as part of a "rebalancing" of the U.S. and Chinese economies, but in the short-run increased consumer spending is "critical" to the U.S. recovery, San Francisco Federal Reserve Bank President John Williams said Friday.

Williams said both consumer and business spending are being hampered by the increased uncertainty and reduced confidence related to budgetary squabbles in Washington.

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