'Pigeon' Powell: "Economic Path Depends on Virus"

Support for Easing Policy After Interest Rate Hold
Monetary Policy Direction Expected at September FOMC
US COVID-19 Deaths Surpass 150,000

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), said that "the path ahead for the economy is unusually uncertain." Wall Street evaluated that the Fed and Chairman Powell showed a 'dovish' stance, expressing concerns about economic uncertainty going forward. The impact on the market was minimal.

On the 29th (local time), the Fed unanimously decided to keep the benchmark interest rate unchanged at the current level (0.00~0.25%) after the Federal Open Market Committee (FOMC) meeting. In its statement, the Fed included a phrase never seen before, stating that "the future economy will depend on the path of the novel coronavirus disease (COVID-19)," reiterating that economic recovery due to COVID-19 will take a long time.

Chairman Powell also emphasized at the press conference following the statement release that "the future of the economy largely depends on controlling COVID-19." He pointed out, "In recent weeks, virus infections have increased and measures to suppress them have resumed," adding, "these factors have begun to weigh heavily on economic activity." According to the Johns Hopkins University aggregate data on the day, COVID-19 deaths in the U.S. surpassed 150,000, and the infection situation remains uncontrolled.

Chairman Powell expressed concern that consumer spending and employment are being more severely affected by the pandemic. He cited credit card usage trends as an example. He said, "Consumer spending has been declining since late June," and "various statistics suggest that the pace of recovery is slowing since infections began to rise."

Major U.S. airlines and automobile manufacturers also reported losses in their Q2 earnings announcements on the same day. Boeing recorded a net loss of $2.4 billion (approximately 2.9 trillion KRW), and General Electric (GE) posted a net loss of $2.2 billion due to poor performance in its aviation business. General Motors (GM) reported its first quarterly loss since facing bankruptcy risk in 2009.

A Wall Street insider evaluated that the Fed’s rate freeze and Chairman Powell’s press conference remarks were largely similar to the June FOMC decision and thus did not have a significant impact on the market, but added that it sent a clear signal that the accommodative policy stance will continue.

The market is focusing on the upcoming September FOMC meeting. Although Chairman Powell said there is no decision yet on proactive guidance regarding monetary policy, once the FOMC minutes are released, the discussions from this meeting are expected to be confirmed. Market experts believe that if discussions have taken place, it is highly likely that such guidance will be introduced at the September meeting.

On the day, the New York stock market and gold prices showed strength, while the value of the U.S. dollar declined. The yield on the 10-year U.S. Treasury also fell.

This content was produced with the assistance of AI translation services.