October 20th, 2020

Fed officials last month saw sizable risks facing economy

By Martin Crutsinger, The Associated Press on October 7, 2020.

Federal Reserve Board Chairman Jerome Powell testifies during a Senate Banking Committee hearing, Thursday Sept. 24, 2020 on Capitol Hill in Washington about the CARES Act and the economic effects of the coronavirus pandemic. (Drew Angerer/Pool via AP)

WASHINGTON – Federal Reserve officials last month believed that while the U.S. economy was recovering faster than expected, it faced ongoing threats, including a failure by Congress to provide further rescue aid.

The Fed on Wednesday released minutes of its most recent meeting, showing that officials based their forecasts of economic gains on the expectation that Democrats and Republicans would resolve their differences and provide further aid, including expanded unemployment benefits and help for small businesses.

The minutes said that “most forecasters were assuming that an additional pandemic-related fiscal package would be approved this year, and noted that, absent a new package, growth could decelerate at a faster-than-expected pace in the fourth quarter.”

The prospects for approval of a new package being passed before the Nov. 3 elections have significantly diminished with President Donald Trump’s decision to cut off negotiations with Democrats. Trump has instead proposed that Democrats approve individual rescue items, such as money for ailing airlines and another round of $1,200 checks for most adults, rather than a comprehensive aid package.

The minutes covered the Fed’s Sept. 15-16 meeting in which officials left their key policy rate unchanged at a record low near zero and signalled that they expected to keep rates at ultra-low levels at least through 2023.

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