Fed "Economic Downturn Without Stimulus"‥Possibility of Expanding Asset Purchases

Fed FOMC Minutes "Rapid Economic Slowdown if Stimulus Package Fails"
Democrats Reject Trump Airline Aid Deal Again
4Q Economic Growth Forecasts Revised Downward

House Speaker Nancy Pelosi is refusing to agree to the stimulus bill being promoted by the White House.
[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. central bank, the Federal Reserve (Fed), expressed concerns that further delays in economic stimulus could slow the pace of economic recovery.

The minutes of last month's Federal Open Market Committee (FOMC), released on the 7th (local time), stated, "The majority of experts assume that the pandemic-related economic stimulus package will be approved within this year. If the new package fails, economic growth in the fourth quarter is expected to slow down faster than anticipated."

The Fed noted, "Many members pointed out that if the size of future fiscal support is significantly smaller or implemented much later than expected, the recovery speed could be slower than anticipated."

This aligns with concerns expressed by Fed Chair Jerome Powell. In a speech at the National Association for Business Economics annual meeting the previous day, Chair Powell warned that the U.S. economy still faces threats and could plunge without additional support.

The U.S. economy, which plunged due to the COVID-19 pandemic, has been steadily rising since June but recently the pace of improvement has slowed. Employment has already shown a clear slowdown, with about 11 million jobs still not recovered.

Reflecting this situation, negative forecasts for the U.S. economy in the fourth quarter are emerging. Consulting firm RMS US on the 6th revised down its forecast for U.S. economic growth in the fourth quarter from 5.1% to 2.5%. Last month, investment bank Goldman Sachs also lowered its fourth-quarter economic growth forecast from 6% to 3%, citing delays in the stimulus bill.

President Donald Trump, after being discharged from the hospital, declared a halt to stimulus negotiations via Twitter the previous day, then urged approval of $25 billion in aid for the airline industry just one day later. On the same day, he returned to the Oval Office to receive updates on the stimulus bill progress, but no progress was made.

On this day, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin discussed airline industry support, but Speaker Pelosi rejected the proposal.

White House National Economic Council Director Larry Kudlow claimed, "If the support amount is smaller, a deal is still possible," but White House Chief of Staff Mark Meadows admitted that an agreement is difficult.

The Fed also indicated that the government and Congress might take stimulus measures on their own. The minutes reported that some members said, "It would be appropriate to further evaluate and discuss at future meetings how asset purchase programs can best support the Fed's goals."

Bloomberg News interpreted this as suggesting that the Fed is open to expanding or modifying its asset purchase policy.

At the September FOMC, the last before the U.S. presidential election, the Fed did not mention the asset purchase expansion that the market expected. The Fed is currently purchasing $120 billion per month in U.S. Treasury or mortgage-backed securities.

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