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.
Kevin Book, Managing Director at Clearview Energy Partners, breaks down the factors that impact the price of gas and what this means for renewable energy initiatives.
Kelsey Sutton, streaming editor at Adweek, talks about the offers going on during Disney+ Day and what the entertainment giant is doing to boost subscriber growth.
We are just one day away from what has been called the most influential tech event in the world. CES 2022 will officially kick off on Wednesday in Las Vegas, but the annual tech summit is being impacted by COVID-19, like so many other recent events. The Consumer Technology Association originally planned for a hybrid event to take place from January 5-8, with some in-person events and some virtual; however, a few big-name companies announced they will not be attending in-person, so the CTA decided to shorten the event by one day, with it now ending on Friday. Consumer electronics senior analyst Will Greenwald joins Cheddar News' Closing Bell to discuss.
Stocks closed mixed Tuesday, with the Dow hitting a record close, but the tech-heavy Nasdaq remained under pressure as bond yields continue to rise. Meanwhile, the S&P 500 closed lower, just shy of a record high. Nancy Prial, Co-CEO & Senior Portfolio Manager of Essex Investment Management joins Cheddar News' Closing Bell to discuss today's close, market predictions for 2022, and more.
This year - for the first time in five years - store openings might actually top announced store closings. Reports show that we're seeing companies opening up new locations by the dozens, and by the hundreds. The need for customers to touch and feel its' products is only one factor in the equation. John Harmon, senior analyst at Coresight Research, joins Cheddar News' Closing Bell to discuss.
Harry Yeh, Managing Director at Quantum Fintech Group, joins Cheddar News' Closing Bell, where he explains why his firm has a target estimate of $400,000 for Bitcoin this year.
California's new composting law will affect what residents do in their kitchens. As of this week, Californians will have to recycle excess food in an effort to reduce emissions caused by food waste. Cities and counties will turn recycled food into compost or use it as a renewable energy source. California's new law is the largest mandatory residential food waste recycling program in the country. Rachel Wagoner, Director of the California Department of Resources, Recycling and Recovery called the law 'the biggest change to trash' since recycling started in the 1980s. She joined Cheddar Climate to discuss.
Like the big changeover to e-commerce for retail, the COVID-19 pandemic has moved car buying trends to the digital showroom. Karl Brauer, an executive analyst at iSeeCars.com, joined Cheddar to talk about the "mindset shift" in consumers and businesses to order-based systems in the United States (something more common in other countries). While more than 60 percent of consumers still prefer to visit dealerships in-person, Brauer noted that consumers are better off ordering a car to spec, which would also help improve supply constraints. "It's really bad right now to be building cars and not really knowing who's going to buy them or when they're going to sell," he said. Manufacturing a car to order would maximize the efficiency of obtaining materials through the supply chain rather than "shotgunning it" at dealerships.
Mark MacDougall, attorney and former prosecutor with the criminal division of the Department of Justice, joined Cheddar to discuss the fraud conviction of Theranos founder Elizabeth Holmes. MacDougall addressed Holmes' stance that what she did was no different than any other Silicon Valley startup's approach to business and how this will shake out for the industry going forward. "I can't imagine it doesn't have some salutary effect on entrepreneurs and people involved in new ventures going forward," he said. Holmes was found guilty on 4 of 11 counts, with each carrying a maximum of 20 years in prison, but MacDougall explained that the lengthy prison sentences were unlikely.
