The Federal Reserve’s rate-setting committee began meeting on Tuesday, a central bank spokeswoman said, while a top lawmaker signaled a new push to get stimulus for the battered US economy through Congress.
Talks between Democrats and Republicans in Washington on a new bill to aid both workers and businesses hit by the coronavirus downturn have stalled for weeks, even as central bank officials including Fed Chair Jerome Powell repeatedly emphasized that the economy needs more support.
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The Fed cut its lending rate to near-zero as the devastating business shutdowns to stop the virus’s spread began in March, and there is practically no chance of that changing as the Federal Open Market Committee (FOMC) begins its two-day meeting.
Analysts are instead watching for further details on the bank’s new inflation targeting strategy, which will keep interest rates lower for longer in a bid to maximize employment, or perhaps comments from Powell on the outlook for the economic recovery.
“America’s central bank is likely to emphasize a decidedly low rate outlook for years to come to help nurse the world’s biggest economy back to health after a record contraction,” said Joe Manimbo, senior market analyst at Western Union Business Solutions, referring to the second quarter when the business shutdowns caused GDP to collapse by a record 31.7 percent.
Lawmakers in the Democrat-controlled House of Representatives were set to leave Washington at the end of the month ahead of the November elections, but in an interview with CNBC, House Speaker Nancy Pelosi said, “We are committed to staying here until we have an agreement,” and that she was “optimistic that the White House, at least, will understand that we have to do some things.”
Democrats in the Republican-led Senate last week blocked a $500 billion proposal that would have included an extra $300 per week in payments to the unemployed. That was less than the $600 given each week up till the end of July by the $2.2 trillion CARES Act signed in March.
Democrats complained that the blocked measure contained no new funds for cities and states, no second-round stimulus checks of $1,200 for individual Americans and insufficient food aid, with Pelosi referring to it as an “emaciated proposal for a massive problem.”
The United States has seen tens of millions of layoffs since mid-March, sending the unemployment rate spiking to 14.7 percent in April.
However, businesses’ moves to reopen amid easing lockdown measures have spurred a tentative recovery, with the unemployment rate dropping to 8.4 percent in August.
Data from the Fed released Tuesday showed industrial production continuing to recover after slumping as the pandemic hit, rising 0.4 percent in August.
However, that was well below its 3.5 percent gain seen in July as a pullback in car production and temporary shutdowns in oil production caused by bad weather hampered the indicator.