US House Speaker Kevin McCarthy has said "we do not have an agreement yet" ahead of a holiday weekend just before the debt default deadline on June 1.
“We knew this would not be easy," Mr McCarthy told reporters on Thursday. "It’s hard but we’re working. And we’re going to continue to work 'til we get this done."
Negotiators from the White House and the Capitol met online on Thursday and Mr McCarthy's top Republican negotiator, Representative Garret Graves, said debt-ceiling talks would continue into the night.
“We’ve been taking to the White House all day,” Mr McCarthy said. “We're working hard to make it happen.”
Most legislators have left Washington for the Memorial Day holiday weekend, but he said he will be around to continue negotiations.
Earlier on Thursday, President Joe Biden maintained that the US would not default on its debt after a series of economic reports indicated growing concerns for the world's largest economy.
Mr Biden said he and Mr McCarthy have had “several productive conversations”.
The framework of the deal is currently focused on the US budget.
The President said he proposed a deal that would cut federal spending by $1 trillion and freeze it for the next two years. But Mr McCarthy has sought to roll back spending to 2022 levels.
“Speaker McCarthy and I have a very different view on who should bear the burden of additional efforts to get our fiscal house in order,” Mr Biden said.
He also sought to show confidence that citizens would not miss Social Security payments, veterans would still have access to health care and economic progress would continue to be made.
“Default puts all that at risk. Congressional leaders understand that and they've all agreed there will be no default,” Mr Biden said.
Mr McCarthy said he had directed his negotiators “to work 24/7 to try to solve this problem”. Kevin Hern, head of the largest Republican caucus in the chamber, said a deal could be reached by Friday afternoon.
The latest round of negotiations follows a report from credit agency Moody's, which found that the impasse is one of many economic problems in the US that will cause emerging markets to suffer.
The credit agency said “any consequences of the debt-ceiling impasse” would contribute to weakening credit conditions in emerging economies.
Thursday's report from Moody's was the latest in a trio of warning signs for the world's biggest economy.
Revised gross domestic product figures released by the Commerce Department showed that the US economy grew by 1.3 per cent in the last quarter, slightly higher than original 1.1 per cent estimates but still at a tepid pace.
Both Moody's and the Federal Reserve expect that the US will enter a mild recession this year.
The credit agency said the US central bank's monetary policy, as well as stress in the banking system, could also harm emerging markets.
What is the US debt ceiling?
“The focus of many market participants has returned to the global economic growth outlook and the future path for US interest rate,” the Moody's report said.
Minutes from the Fed's May 2-3 meeting showed that policymakers remain uncertain on how to tackle interest rates in future meetings, with some participants arguing for a pause in rate increases while others felt more tightening was needed.
The central bank raised interest rates to the range of 5 and 5.25 per cent in a continued effort to drive down the nation's inflation. The Fed's preferred inflation metric showed prices increased by 4.2 per cent year-on-year in March, still well above their 2 per cent target.
“Risks to our baseline include whether and how quickly US inflation subsides and the Fed's response to it,” Moody's said.
The agency expects growth to decline “in most emerging markets this year” with commodity exporters in the Middle East among those to face the most hardship. Exporters in Africa and Latin America are also projected to suffer.
The report comes a day after Fitch, a rating agency, placed the US on negative credit watch because of the impasse in Washington.
“Tonight's warning underscores the need for swift bipartisan action by Congress to raise or suspend the debt limit and avoid a manufactured crisis for our country,” Treasury Department spokeswoman Lily Adams tweeted.
With the threat of a default looming, Treasury Secretary Janet Yellen said the US was already feeling the effects of brinkmanship over the debt ceiling. Fed Chair Jerome Powell has also warned his department would not be able to protect the US economy in the event of a default.
Time is running out, with only seven days to go until the date on which Ms Yellen said the US could default on its financial obligations. Even a short-term default could have disastrous effects for the US economy, she has warned.
The Treasury is now preparing for the possibility that the $31.4 trillion debt limit will not be raised in time, The Wall Street Journal reported. The department has been preparing a backup plan that would delay some payments should that occur.
Members of the House of Representatives began on a 10-day recess and are not scheduled to return until June 4. Mr McCarthy said House members would be given 24 hours' notice to return to Washington if there needs to be a vote on a proposal before then.
With such a tight deadline and with many members currently out of town, Congress will have to rush the bill through both chambers before it goes to Mr Biden's desk.
