This May 22, 2020 photo shows the Federal Reserve building in Washington. (AP Photo/Patrick Semansky)
By Martin Crutsinger
he Federal Reserve is promising to use its “full range of tools” to pull the country out of a recession brought on by a global pandemic, signaling that it would keep interest rates low through 2022.
In its semi-annual monetary policy report to Congress, the central bank said Friday that the COVID-19 outbreak was causing “tremendous human and economic hardship across the United States and around the world.”
In response, the Fed said it's “committed to using its full range of tools to support the U.S. economy in this challenging time."
The Fed’s report comes two days after a policy meeting where the central bank kept it benchmark interest rate at a record low of zero to 0.25% and signaled that it planned to keep it there through 2022. The Fed said it would continue to buy billions of dollars of Treasury and mortgage-backed securities to support the financial market.
Federal Reserve Chairman Jerome Powell will testify before congressional committees for two days next week, starting Tuesday, on the new report. Lawmakers are expected to ask Powell to explain how the central bank plans to further support the economy during what is expected to be the steepest economic downturn in the last 70 years.
Powell predicted this week that the recovery will likely be slow with Americans “well into the millions” unable to get their old jobs back.
Powell’s downbeat assessment of how long it could take labor market to recover along with other renewed fears about the pandemic’s impact on the economy helped trigger a huge selloff in the market on Thursday with the Dow Jones industrial average falling 1,861.82 points or 6.9%.
After the market plunge, President Donald Trump sent out a tweet criticizing the Fed's views that a full economic recovery could take a long time.
“The Federal Reserve is wrong so often,” Trump tweeted. “I see the numbers also, and do MUCH better than they do. We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021.”
The report submitted to Congress this week included economic projections from Powell and other top Fed officials. They showed that Fed officials expect a steep drop in economic growth of 6.4% this year with unemployment remaining at a sharply elevated 9.3% through this year.
A recently as February, unemployment was at a half-century low of 3.5%,
The economic projections showed that the Fed's key interest rate, which the central bank cut in March to a record low near zero, is expected to remain at that level through the end of 2022 with only two of the 15 Fed officials expecting a rate higher than zero by late 2022.
The Fed did not announce any new policy initiatives at its meeting this week, but financial analysts believe that those could be unveiled later this year, depending on how the economy performs in the second half.
The Fed noted a sharp deterioration in the labor market with nearly 20 million jobs lost since February, “reversing almost 10 years of job gains.”
“The most severe job losses have been sustained by the socioeconomic groups that are disproportionately represented among low-wage jobs,” according to the report.
The Fed on Friday also summarized a series of events that it has been holding since last year aimed at getting public input into improvements the central bank can make in its monetary policy work. That included an event in May in which it sought to determine how the coronavirus was impacting people's lives.
“People have put their lives and livelihoods on hold during this public health emergency,” Powell wrote in an introductory note. “While all of us have been affected, the burdens are falling most heavily on those least able to carry them.”
The Fed, Powell said, remains focused on laying the foundation for a return to the strong labor market the country was experiencing last year.
The U.S. will be implementing a vaccine mandate for all people entering through its land borders, removing exemptions for "essential" travelers such as truckers, students, and business people. While the Canadian Trucking Alliance argues that the new, stricter rule might exacerbate ongoing auto supply chain issues, some health experts see the potential for helping curb the ongoing pandemic. Anthony Santella, a professor of health administration at the University of New Haven, joined Cheddar to give his take on the updated border crossing restriction. "We can't just focus on one type of travel. We need to ensure that it's clear and consistent across all types of travel," Santella said.
Will Rhind, CEO of GraniteShares, joins Cheddar News' Closing Bell, where he says he believes the Fed's plans of increasing rates is taking its toll on some of the more speculative stocks and the technology market.
Melissa Gonzalez, CEO and Founder of The Lionesque Group, joins Cheddar News' Closing Bell, where she explains why she feels mixed about the Walmart's new initiative and what will make mass adoption of this offering difficult.
Exercise equipment maker Peloton is attempting to run away from a recent bout of controversy. CEO John Foley published an open letter to employees on Thursday after reports that said Peloton was pausing production of its Bike and Tread products, delaying the opening of a new U.S. factory, and considering job cuts. In the letter, Foley wrote that the information in the reports was 'incomplete,' 'out of context,' and not reflective of Peloton's strategy. Peloton's stock responded on Friday, with shares bouncing back after falling nearly 24% in the regular session on Thursday. CFRA Research's Director of Research Ken Leon joined Cheddar News' Closing Bell to discuss.
Home essentials maker Outlines announced its launch at the beginning of 2022, along with $1 million in pre-seed funding led by Social Impact Capital. Outlines says it is re-imagining how we keep our homes clean while also reducing plastic waste. The company's debut product, the Shower Liner System, is made of long-lasting materials, including easy-to-recycle plastic. Outlines co-founder and CEO Luke Young and co-founder and COO Megan Ceryanec joined Cheddar News' Closing Bell to discuss.
Despite Netflix's successful fourth-quarter earnings report, investors are hitting the 'pause' button after the company admitted that competition from other streaming platforms could eat into growth. Netflix is also lowering expectations for expected subscriber growth for the first quarter of this year, anticipating it will add just 2.5 million, far below the 3.98 million subscribers it added during the same quarter one year ago. What could happen to the streaming giant as the streaming wars keep heating up? Greg Martin, Co-Founder of Rainmaker Securities, joins Cheddar News' Closing Bell to discuss whether Netflix could lose its top spot, how it's trying to compete with other platforms, the streaming industry landscape, and more.
eToro, the social trading platform that offers crypto, forex, and equities, recently announced that it's giving U.S. users the option to include stocks and ETFs as part of their investment portfolios. Lule Demmissie, CEO of eToro U.S., joined Cheddar to talk about the company’s expanded offerings. "We felt, although crypto is a fantastic asset class, that individuals benefit from having a broader access to different kinds of investments, and equities is definitely one of them," Demmissie noted.
Coming off of CES, Blink Charging announced a partnership with legacy automaker General Motors to provide charging stations for its newest electric cars. The company specializes in stations they own and operate that also accommodate residential and commercial locations. Michael D. Farkas, founder and CEO, noted that they "don’t discriminate” when it comes to locating their chargers while also taking the philosophy of seeing their hardware more like hot water heaters rather than smartphones constantly in need of upgrading. "We believe it's one of the reasons why we were selected by GM," Farkas said. "These dealerships have to invest in these locations and make sure that this hardware is workable for a very, very long period of time."
