US Fed: "Significant Risk of Corporate Bankruptcies"

Mentioned in Semiannual Monetary Policy Report
Chairman Powell Scheduled to Testify Before Congress Next Week

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. central bank, the Federal Reserve (Fed), has assessed that the risk of bankruptcy among American companies is considerable. Although the U.S. economy is recovering, the Fed still views the risks as significant.

On the 19th (local time), the Fed pointed out in its semiannual monetary policy report that while the financial conditions of banks and individuals are sound, business loans are at historically high levels, exposing not only small and medium-sized enterprises but also large corporations to substantial bankruptcy risks.

This indicates that despite the U.S. economy gradually emerging from the COVID-19 situation, the Fed's outlook on the economy remains negative.

This report was released ahead of Fed Chair Jerome Powell's congressional testimony next week. Powell is expected to testify before Congress for the first time since the Democratic Party secured control of both the House and Senate.

Considering the contents of the report, Powell is anticipated to emphasize the necessity of the $1.9 trillion economic stimulus package that the Democrats plan to pass next week, along with maintaining zero interest rates for an extended period and continuing asset purchases.

A day earlier, U.S. Treasury Secretary Janet Yellen also stated in an interview with CNBC that a $1.9 trillion stimulus package is necessary and expressed a willingness to tolerate inflation.

Secretary Yellen said, "Inflation has been very low over the past decade. While inflation is a risk factor, the Federal Reserve has the tools to address the problem," adding, "The greater risk is the permanent damage to people's lives and livelihoods caused by COVID-19."

Secretary Yellen reiterated, "It is very important to push for a large package to alleviate the (American people's) suffering." The ruling Democratic Party in the U.S. intends to pass the stimulus bill in the House next week.

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