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US Fed says outlook uncertain, stimulus essential

Published : Friday, 18 September, 2020 at 12:00 AM  Count : 175

WASHINGTON, Sept 17:  The Federal Reserve pledged Wednesday to keep boosting the US economy with low rates to help recover the tens of millions of jobs lost in the pandemic, but said additional help from the government will be key.
Government stimulus provided in the early stages of the pandemic was "essential" to the better-than-expected progress made so far, Fed Chair Jerome Powell said, but another dose will likely be needed since the outlook remains "highly uncertain."
The Fed announcement came amid renewed optimism that the White House and Democratic leaders in Congress will reach a compromise on a new spending package, even as data showed spending gains have slowed and layoffs continue.
The policy-setting Federal Open Market Committee said it will keep interest rates low until it has achieved its goal of maximum employment, allowing inflation to push beyond two per cent in order to spur job gains as the world's largest economy recovers from the Covid-19 pandemic.
Powell told reporters that "overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain."
"It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year," Powell told reporters. "My sense is that more fiscal support is likely to be needed."
He noted that roughly 11 million people are still out of work due to the pandemic and as many were working in industries that are likely to struggle, "those people may need additional support."
Small businesses also continue to struggle, while state and local governments dealing with a drop in revenue at the same time spending has gone up, he said.
The median GDP forecast among the 17 FOMC members reflect the better-than-expected US recovery, and they now see the economy contracting by only 3.7 per cent this year, compared to 6.5 per cent drop expected in June.
However, growth expectations for 2021 and 2022 were more modest than previously.
US unemployment has fallen to 8.4 per cent from its peak of 14.7 per cent in April amid the most widespread pandemic business shutdowns, and the FOMC members' median forecast is for the jobless rate to end the year at 7.6 per cent and drop to 5.5 per cent by the end of next year.
"The labor market has been recovering but it's a long way from maximum unemployment," Powell said.
Powell, whose pleas have become increasingly urgent, said it is up to Congress to decide what form the aid will take.
Talks in Washington on a new bill to aid both workers and businesses hit by the coronavirus downturn have stalled for weeks, but Democratic House Speaker Nancy Pelosi and White House chief of staff Mark Meadows each made encouraging statements about the potential to break the impasse.
That message was quickly undermined by President Donald Trump, who renewed his attacks on Democrats while cheering a CNBC personality who called Pelosi "Crazy Nancy" in a live broadcast.   -AFP









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