Fed officials fear lack of stimulus will stifle the US economic recovery, according to September meeting minutes
- Minutes from the
Federal Open Market Committee's September 15-16 meeting show Federal Reserveofficials raising concerns that a lack of new fiscal support could hinder the US economic recovery. FOMCparticipants "assumed the enactment of some additional policy support this year," according to the minutes. Without such support, "the pace of the economic recovery would likely be slower," they added.
- The meeting came roughly three weeks before President Trump abruptly halted negotiations on a new bill, saying in a Tuesday tweet he would freeze stimulus talks until after the presidential election.
- Some FOMC members fired back at the president's action. Letting the
economymove forward without congressional support is like "letting the forest fire just rage," Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Wednesday.
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Federal Reserve officials raised concerns about a lack of additional fiscal stimulus during their September meeting, roughly three weeks before President Donald Trump axed negotiations for new aid.
Minutes of the Federal Open Market Committee's September 15-16 meeting revealed policymakers "assumed the enactment of some additional fiscal policy support this year." Without such support from Congress, "the pace of the economic recovery would likely be slower," according to the minutes.
The absence of new stimulus would also "exacerbate economic hardships in minority and lower-income communities," FOMC participants added. The two groups are among those hit hardest by the virus and its economic fallout.
"For the time being, the
Chances new aid will arrive faded on Tuesday. Trump announced in an afternoon tweet he was halting talks on new aid until after the November 3 presidential election. The move shocked politicians, economists, and investors and signaled that the already slowing economic recovery wouldn't receive any help for at least a month.
Read more: A $2.5 billion investment chief highlights the stock-market sectors poised to benefit the most if stimulus is eventually passed after the election — and explains why Trump ending negotiations doesn't threaten the economic recovery
Trump later reversed course and called on Congress to allocate $25 billion to airline aid, $135 billion to the Paycheck Protection Program, and funds for another round of direct payments. Yet Democrats have previously balked at a piecemeal approach and are set to continue backing their $2.2 trillion measure.
FOMC members decided at the meeting to maintain asset purchases at least at their current pace and hold interest rates near zero until inflation averages 2% and maximum employment is reached. Economic forecasts released after the meeting ended showed most policymakers expecting rates to stay put through 2024.
Some officials who attended the September meeting have since responded to Trump's action. Cleveland Federal Reserve President
"There's still a lot of households and a lot of small businesses that really need that kind of help, and even though the recovery has come in somewhat stronger than many of us thought it would, we're still in a pretty big hole," she said on CNBC.
Millions of Americans will face a tougher recovery if fresh aid isn't passed soon, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Wednesday morning. While stimulus passed during the 2008 recession was often touted as a bailout for banks involved in the financial crisis, relief passed today doesn't pose the same "moral hazard."
Continuing without congressional support is like "letting the forest fire just rage," Kashkari added.
"Eventually it'll burn itself out, and meanwhile all the animals are dead," he said. "I mean, there are enormous consequences if we just let things go, and the downturn will end up being much, much worse."
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