Fed Officials Warn CCP Virus Will Weigh Heavily on US Economy
Federal Reserve officials warned of “extremely elevated” levels of uncertainty around the economic o..
Federal Reserve officials warned of “extremely elevated” levels of uncertainty around the economic outlook and said they expect that the pandemic will continue to exact a heavy toll on Americas economy, newly released minutes from a July policy meeting show.
The central banks policymaking body, the Federal Open Market Committee, on Wednesday released minutes of its July 28-29 meeting, which indicate that members expressed concern that the CCP (Chinese Communist Party) virus would continue to be a drag on the economy.
Officials at the meeting “noted that the path of the economy would depend significantly on the course of the virus and that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term,” the document shows.
Besides the virus, risks to Americas fledgling economic recovery include business uncertainty about the sustainability of the recent surge in consumer spending compounded by a possible pullback in stimulus. Congress has, since March, approved around $3.6 trillion in new spending to counteract the pandemic blow to the economy but talks have stalled on further measures, prompting President Donald Trump to take executive action to extend pandemic unemployment benefits and payroll tax deferral to provide relief to American families.
Federal Reserve Chairman Jerome Powell and other Fed officials have expressed concern that the end of the additional unemployment aid and the expiration of support for small businesses will slow the recovery.
“There will be a need for more support from us, and from fiscal policy,” Powell said after the July meeting, referring both to the Feds arsenal of stimulus measures, like interest rate adjustments and the bold asset-buying program that has seen the Feds balance sheet swell to around $7 trillion, and congressional spending power.
Fed officials said in the minutes that the rebound in consumer spending had been “particularly strong,” in part because of the relief provided by Congress. But businesses remained cautious about their spending, the minutes said, as they “continued to report extraordinarily high levels of uncertainty and risks.”
The difficulties faced by companies include disrupted supply chains, ongoing closures and reopenings related to the virus, and “elevated employee absenteeism.” Businesses also worried about the uncertainty surrounding any further relief package from Congress, the minutes said.
“The staff continued to observe that the uncertainty related to the economic effects of the pandemic was extremely elevated and that the unusual nature of the pandemic-related shock made assessments about how the economy might evolve in the future more challenging than usual,” officials said, noting that a pessimistic scenario was just as likely as their baseline prediction.
