Fed Chairman to Congress: “More stimulus needed”

#Fed #Congress #stimulus


Wednesday, Fed officials stressed that more fiscal stimulus is critical to sustaining the economic recovery, and US stocks fell as pessimism began sinking in that Congress would ever deliver a new aid package.

Chairman Powell continued to wave the fiscal flag carefully at a congressional hearing saying that more support was likely to be necessary.

Others were more vocal, with Cleveland Fed President Loretta Mester saying it was very much needed given the “deep hole” the economy is climbing out of.

Chicago Fed President Charles Evans expressed concern the stimulus he penciled in will not be forthcoming.

Boston Fed President Eric Rosengren suggested it will take another wave of infections to prompt action, and likely not until next year.

Like Chairman Powell, Fed Vice Chair Richard Clarida emphasized the recovery has so far been stronger than officials predicted a few months ago. He also made clear the road ahead will be difficult and repeating that fiscal support will help.

Democrats and Republicans have been at loggerheads over another virus relief package, with no formal negotiations since early August

The Fed wants to put maximum pressure on Congress to re-up fiscal support given the limits to monetary policy in dealing with the severe and asymmetric virus shock and fear of a new fall wave.

Atlanta Fed President Raphael Bostic said in a virtual speech to an Alabama Chamber of Commerce that he is “hopeful that policy makers in Washington as well as at the state level find creative ways to get that support out there.”

With relief running out there is a pretty significant chance that some of the temporary disruption and dislocation can become permanent,” Mr. Bostic said. “That just means the hurdle that we have to climb is going to be that much higher.

The S&P 500 fell 2.4%, the biggest decliner since 8 September and the 5th decline in 6 days, a sign that investors are becoming more downbeat on prospects for aid/relief/stimulus once seen as a near-certainty.

Interest rates markets showed traders were easing on inflation bets, a sign of pessimism that the Fed alone will not be able to bring price gains to its 2% goal in coming years.

Declines in the stock market, until recently were attributed to a reversal of excessive tech-share gains, have increasingly been put down to concerns about the recovery and the need for more aid/relief/stimulus.

Have a healthy day, Keep the Faith!