AP

The federal deficit climbed higher into record territory in July, hitting $1.27 trillion with two months remaining in the budget year.

The Treasury Department said Wednesday that the July deficit totaled $180.7 billion, slightly more than the $177.5 billion economists had expected.

The Obama administration is projecting that when the current budget year ends on Sept. 30, the imbalance will total $1.84 trillion, more than four times last year's record-high.

The soaring deficits have raised worries among foreign owners of U.S. Treasury securities including the Chinese, the largest holder of such debt.

President Obama's economic team sought to reassure the Chinese during high-level talks last month that the administration is committed to reducing the deficits once the current economic and financial crises have been resolved.

So far, interest rates have remained low as the Federal Reserve has kept the federal funds rate, a key short-term interest rate at a record low near zero in an effort to jump-start the economy. The concern, however, is that rates could begin rising despite the Fed's efforts if foreigners suddenly lose confidence in the government's ability to manage its debt burden.

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