Fed minutes show concerns about severity of downturn

Fed minutes show concerns about severity of downturn

Fed minutes show concerns about severity of downturn

WASHINGTON — Federal Reserve officials last month expressed concerns about the severity of the economic downturn triggered by the coronavirus pandemic, saying the drop in economic activity in the spring would likely be the steepest in the post-World War II period.

The minutes of the June 9-10 discussions, which were made public Wednesday, show officials grappling with economic disruptions that had already occurred and noting the crisis was “not falling equally on all Americans.”

The minutes say that Fed officials discussed how the sharp rise in joblessness had been especially severe for lower-wage workers, women, African Americans, and Hispanics.

The Fed’s policy-making committee voted 10-0 at the June meeting to keep central bank’s benchmark interest rate at a record low near zero and officials expected that it would remain at that ultra-low level through 2022.

In an interview Wednesday with Fox Business Network, President Donald Trump, who was highly critical of Fed Chairman Jerome Powell for much of last year, said Powell has done a good job in dealing with the coronavirus.

“I would say I was not happy with him at the beginning, and I’m getting more and more happy with him. I think he stepped up to the plate. He’s done a good job,” Trump said. “I would say that, over the last period of six months, he’s really stepped up to the plate.”

Trump, however, declined to say whether he would nominate Powell for a second term as Fed chairman if he wins re-election. Powell’s current four-year term is up in 2022.

The minutes of the June discussions show that officials had received a briefing from the Fed staff on possible ways to enhance the Fed’s commitment to keeping rates low for an extended period. Those included the use of forward guidance in the policy statement and purchases of long-term bonds, both items the central bank is currently employing.

The Fed staff also briefed on a tool that the central bank has not used in seven decades: establishing caps on interest rates at certain maturity levels.

Under interest-rate caps, the Fed would purchase securities, such as three-year notes, to keep interest rates from rising above a certain limit. The central banks of Japan and Australia are currently employing that strategy.

However, the Fed minutes indicate little support for that approach, especially since rates are already so low. Several Fed officials indicated more support for possibly expanding the forward guidance language, possibly by tying future rate increases to specific economic outcomes, such as a rise in inflation or drop in unemployment.

“Whatever strategy the Fed ends up choosing, it is clear that interest rates will remain at near-zero for many years,” Andrew Hunter, senior U.S. economist at Capital Economics., wrote in a research note.

The minutes show that even before the recent spike in virus cases in Western and Southern states, Fed officials worried at their June meeting about what a resurgence of cases might do to efforts to mount an economic recovery.

“A number of participants judged that there was a substantial likelihood of additional waves of outbreaks, which in some scenarios, could result in further economic disruptions and possibly a protracted period of reduced economic activity,” the minutes say.

In recent public appearances, Fed Chairman Jerome Powell has stressed that the central bank plans to employ all of its tools to support a recovery from the current recession. He has also said that Congress, which has already approved record levels of support for laid-off workers and businesses, should consider doing more.

The Fed’s next meeting is July 28-29.

___

Associated Press writer Darlene Superville contributed to this report.

Martin Crutsinger, The Associated Press

Business

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta premier Jason Kenney declared a public health state of emergency Tuesday and sweeping new measures as COVID-19 cases in the province continue to rise. (photo by Chris Schwarz/Government of Alberta)
Kenney declares state of public health emergency as COVID-19 cases rise

High schools shift to online learning, businesses face new restrictions

Pipestone Community committee members and core rink volunteers each put in 600 hours of volunteer work to renovate the Pipestone Community Rink this year. From left to right: Andy Dansereau, Colton Huber, James Huber, and Dave Pockrant. Shaela Dansereau/Pipestone Flyer.
New renovations complete on Pipestone Community Outdoor Skating Rink

New boards and chain-link fence on sides of rink to reduce puck loss.

Silver or grey four-door sedan believed to be the suspects’ vehicle. Photo supplied/Leduc RCMP
Leduc RCMP investigate break and enter to Calmar Post Office

Over 50 packages stolen from the Calmar Post Office Monday morning.

Alberta’s chief medical officer of health, Dr. Deena Hinshaw, announced the province surpasses one million COVID-19 tests Friday. (Photo by Chris Schwarz/Government of Alberta)
COVID-19: Central zone active cases up by 100 in last 24 hours

Most central Alberta communities under province’s enhanced measures list

Millet Fire Department 2019. Photo/ Pipestone Flyer.
Millet Fire Department hosts “Light it Up for Liam” event

The Millet Fire Department is lighting up the fire hall this season with holiday spirit.

Kyle Charles poses for a photo in Edmonton on Friday, Nov. 20, 2020. Marvel Entertainment, the biggest comic book publisher in the world, hired the 34-year-old First Nations illustrator as one of the artists involved in Marvel Voice: Indigenous Voices #1 in August. THE CANADIAN PRESS/Jason Franson
VIDEO: Indigenous illustrator of new Marvel comic hopes Aboriginal women feel inspired

Kyle Charles says Indigenous women around the world have reached out

Prime Minister Justin Trudeau speak to the media about the COVID-19 virus outside Rideau Cottage in Ottawa, Friday, Nov. 20, 2020. THE CANADIAN PRESS/Adrian Wyld
Canada’s inability to manufacture vaccines in-house will delay distribution: Trudeau

First doses of COVID-19 vaccine expected in first few months of 2021, prime minister says

This undated photo issued by the University of Oxford shows of vial of coronavirus vaccine developed by AstraZeneca and Oxford University, in Oxford, England. Pharmaceutical company AstraZeneca said Monday Nov. 23, 2020, that late-stage trials showed its coronavirus vaccine was up to 90% effective, giving public health officials hope they may soon have access to a vaccine that is cheaper and easier to distribute than some of its rivals. (University of Oxford/John Cairns via AP)
VIDEO: How do the leading COVID vaccines differ? And what does that mean for Canada?

All three of the drug companies are incorporating novel techniques in developing their vaccines

Ilaria Rubino is shown in this undated handout image at University of Alberta. Alberta researcher Rubino has developed technology allowing mostly salt to kill pathogens in COVID-19 droplets as they land on a mask. THE CANADIAN PRESS/HO-University of Alberta
Alberta researcher gets award for COVID-19 mask innovation

The salt-coated mask is expected to be available commercially next year after regulatory approval.

Russ and Luanne Carl are sharing about their experiences of fighting COVID-19 this past summer. (Photo submitted)
Stettler couple opens up about COVID-19 battle

Luanne and Russ Carl urge others to bolster personal safety measures amidst ongoing pandemic

This 2019 photo provided by The ALS Association shows Pat Quinn. Quinn, a co-founder of the viral ice bucket challenge, died Sunday, Nov. 22, 2020, at the age of 37. (Scott Kauffman/The ALS Association via AP)
Co-founder of viral ALS Ice Bucket Challenge dies at 37

Pat Quinn was diagnosed with Lou Gehrig’s disease, also known as amyotrophic lateral sclerosis, in 2013

Minister of Justice and Attorney General of Canada David Lametti speaks with the media following party caucus in Ottawa, Tuesday, January 28, 2020. THE CANADIAN PRESS/Adrian Wyld
Exclusion of mental health as grounds for assisted death is likely temporary: Lametti

Senators also suggested the exclusion renders the bill unconstitutional

Claudio Mastronardi, Toronto branch manager at Carmichael Engineering, is photographed at the company’s offices in Mississauga, Ont., Thursday, Nov. 19, 2020. As indoor air quality becomes a major concern in places of business, HVAC companies are struggling to keep up with demand for high quality filtration systems. THE CANADIAN PRESS/Chris Young
Business is booming for HVAC companies as commercial buildings see pandemic upgrades

‘The demand right now is very high. People are putting their health and safety ahead of cost’

Prime Minister Justin Trudeau speak to the media about the COVID-19 virus outside Rideau Cottage in Ottawa, Friday, Nov. 20, 2020. THE CANADIAN PRESS/Adrian Wyld
Long-awaited federal rent subsidy program for businesses hurt by COVID-19 opens today

The new program will cover up to 65 per cent of rent or commercial mortgage interest

Most Read