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The Fed is facing a wave of the virus, increasing the risk of recovery



(Reuters). In a rapidly changing global pandemic, this was not the turn that U.S. Federal Reserve officials had hoped for in early June, when their forecasts showed reserved optimism about a sudden early economic recovery and steady slow growth.

PHOTOS PHOTO: Federal Reserve Chairman Jerome Powel, wearing a face mask, testifies before the House of Representatives Financial Services Committee in a hearing on how the supervised Treasury Department and the Federal Reserve responded to an outbreak of coronavirus disease (COVID-19). Capitol Hill in Washington DC, USA, 2020 June 30 Thasos Catopod / Pool via REUTERS

Over the next seven weeks, a lot went down.

The coronavirus pandemic intensified and led to new economic constraints. The data show a possible slowdown in business and rents. And hitherto stalled talks in Washington for further government aid have pushed the country to the brink of a cost cliff.

(GRAPHICS – Fed faces new wave Fed faces new wave: here)

In short, the risk of a U.S. recovery has risen sharply, and a new Fed policy statement released Wednesday afternoon will show how seriously U.S. central bankers view them. On Tuesday, the Federal Reserve has already looked to the outlook – from September 30th. Until 31 December. She was able to take advantage of the emergency credit programs she had set up at the start of the pandemic, when there were still hopes for a rapid V-shape recovery.

(GRAPHICS – screws tightened again? Screws unscrewed: here)

Fed officials “have always feared that a recurrence of the virus will lead to a recurrence of the virus that will prevent recovery,” said Krishna Guha, vice president of Evercore ISI. Now that the disease has hit the summer, the Fed “is not debating whether this is a short-term or longer-term downturn and how it is affecting its policies.”

The policy statement will be published at 2 p.m. EDT (1800 GMT) and Fed Chairman Jerome Powell plan to hold a press conference in half an hour. No new economic forecasts will be presented at this meeting.

The Fed cannot be expected to announce important policy decisions on Wednesday. Officials may note the pending changes in this fall in relation to the inflation target, or begin to set clear targets for unemployment or inflation, before considering raising interest rates from the current near-zero level.

According to the June In the minutes of the Federal Reserve meeting, politicians evaluating the target welcomed the guidelines and several federal federation analysts said they expected them to be published at the September session of the Federal Open Market Committee.

However, since March. Launching a dozen new programs to combat the economic downturn from the pandemic, the Fed is now monitoring economic developments and developments.

These measures were mainly aimed at providing emergency support to the economy, which probably took a historic look in April-June. The first estimates of gross domestic product growth for that period will be published on Thursday, and the average forecast of economists surveyed by Reuters is a 34% annual decline.

In addition, recent data suggests that the expected reverberation, which began during the unexpected lease phase in May and June, may have been flat, prompting the Fed to expand its emergency program program at least until the end of the year.

For example, the official unemployment rate fell from 14.7 percent. April Up to 11.1 percent. In June, however, a survey conducted since then by the Federal Reserve of Dallas and a new employment forecast forecast by the Federal Reserve of St. Louis show that employment has reduced the problem. month. Last week for the first time since March. New claims for unemployment insurance have risen.

(GRAPHICS – falling rain jobs?: Here)

“The spike in viral viruses is releasing oxygen from a strong economic recovery,” which appears to have taken shape in May and June, July 24th. Scott Anderson, Chief Economist of the Western Bank, wrote in the analysis.

Also of concern are some of the key measures approved at the start of the pandemic to strengthen families and businesses, which amount to $ 600 a week in additional unemployment benefits. Members of Congress are debating a possible extension, but the benefits will end this week, a sign in general that the pandemic schedule is different than the leaders elected when they approved the original pandemic relief package.

Approximately 30 million people currently receive unemployment benefits, accumulating $ 18 billion in disposable income each week. Along with the $ 520 billion lent to small businesses under the Paycheck protection program, many firms and families have been able to keep costs down, pay rent and mortgage payments, and stop what would have been a much worse economic shock.

When the Fed meets the outcome of congressional talks on further aid, the economic environment remains uncertain – another risk that people control.

PHOTOS PHOTO: A man rides a bicycle in front of the Federal Reserve Board building on Constitution Avenue in Washington, DC, USA, 2019. March 27 REUTERS / Brendan McDermid / File photo

“If these programs are not extended, the number of redundancies could increase and job growth could weaken even further. Although the sharp decline is expected, the recovery of the labor market is expected to be long, uneven, “Anderson said.

Users may already be inclined to buckle. July. The conference council’s consumer expectations index fell sharply. Major states such as Florida, Texas and California are experiencing a major downturn, “no doubt triggered by the revival of COVID-19,” study director Lynn Franco said Tuesday.

“Looking to the future, consumers have become less optimistic about the short-term economic and labor market outlook and remain weak about their financial prospects. “Such uncertainty about the short-term future is not good for recovery or for consumer spending,” she said.

Reports: Howard Schneider; Edited by Dan Burns and Andrea Ricci

Our standards:Thomson Reuters Trust Principles.

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