Fed Officials Warned of Slowdown Without Stimulus

Despite improvements in the unemployment rate, “we are nowhere near where we want to be,” John C. Williams, the president of the Federal Reserve Bank of New York, said in remarks delivered on Wednesday. “This is not a standard recession, and the economic future is inextricably tied to the spread of the virus.”

Government lifelines, including a $600 expansion of unemployment benefits, have run dry at a moment when many economists say more help is needed.

“If we don’t support people who have lost their jobs, then they can’t pay their bills, and then it ripples through the economy, and the downturn is much worse than it needs to be,” Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, said on CNBC on Wednesday.

It is unclear how quickly fading support for out-of-work Americans will inflict harm on the broader economy. Some Fed officials said in September that the savings cushion households have built up since the pandemic took hold could help sustain spending. But others said if that buffer reflected reduced spending by high-income consumers, rather than distressed households, “it was unlikely to provide much momentum to future consumption.”

The Fed has taken far-reaching actions itself to support the economy, cutting rates to near zero, buying huge quantities of bonds and rolling out never-before-tried emergency lending programs for companies and state governments.

In its most recent policy statement, the Federal Open Market Committee said it expected to hold rates steady near rock bottom — where they have been since March — until the job market reached what it saw as full employment “and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

That significant update reinforced a pledge the Fed made in August to tolerate higher price gains to offset periods of weak inflation, and it underscored that officials will be patient as they try to help the economy through the months and years ahead.

Article source: https://www.nytimes.com/2020/10/07/business/economy/federal-reserve-slowdown-stimulus.html