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 federal government and numerous industries have been preparing for a greener future, setting goals to reduce greenhouse emissions by switching to electric vehicles. But the next hurdle to clear is convincing the wider public to get on board. Arun Kumar, managing director in automotive practice at AlixPartners, spoke to Cheddar's Ken Buffa about consumer trends related to EV transition and said he believes a widespread switch is imminent in 2022. Despite this, he acknowledged there are still significant obstacles to overcome, including high prices and more charging stations. "Without charging infrastructure, people are going to struggle with increasing adoption of electric vehicles in the future," Kumar told Cheddar. "I think by 2030 our estimate is that about a million chargers need to be put in place nationally in the U.S."
The pandemic has supercharged the creator economy, and there are no signs of it slowing down no matter when the pandemic officially ends. Creators prove to be a key factor in driving purchasing decisions and retail sales, and an increasing amount of platforms are taking advantage of the social influence. Karissa Bell, senior editor at Engadget, joins cheddar news to discuss the creator economy boom.
The National Women's Soccer League is partnering with Voyager Digital as its first-ever cryptocurrency brokerage in a multi-year deal. Marla Messing, interim CEO of the NWSL, and Steve Ehrlich, CEO of Voyager Digital, joined Cheddar to discuss benefitting the league and educating players and fans as a way of democratizing cryptocurrency. Messing explained that the players themselves will own half the assets as part of how the deal is structured. "My hope is, just in terms of the expectations of crypto over the long term, that I hope a lot of them are able to just let it sit there," she said. "And that one day this will be a nice retirement account for them."
Howard Lorber, chairman, president, and CEO of Douglas Elliman Inc., and Scott Durkin, CEO of Douglas Elliman Realty, joined Cheddar's "Opening Bell" to talk about the real estate brokerage company's recent IPO launch on the New York Stock Exchange following the spinoff of its tobacco subsidiary Vector Group. "There are many investors that cannot buy tobacco because of their mandates," said Lorber. "And therefore splitting off Douglas Elliman the real estate, and there's a lot of people looking for real estate investments, so they'll be able to buy Douglas Elliman, and those that want tobacco can buy Vector alone." The pair also discuss the future of New York real estate and the auxiliary business the property broker sees as growth prospects.
Despite a champagne shortage ahead of New Year's Eve, adult beverage retailers are staying optimistic about 2022. Cathy Lewenberg, COO at online alcoholic beverages platform Drizly, joined Cheddar to talk about the sunny outlook for next year and the current state of the industry. She noted a 20 percent higher demand for champagne year-over-year has led to the holiday's shortfall and that the spirit category is continuing to thrive with tequila on pace to outsell vodka for the first time. "Tequila has just been on fire on our platform. It's grown 13 percent in share on our platform over the last couple of years where vodka obviously had been the leader," she said. "Tequila is the top thing in addition to bourbon that retailers are looking to give more shelf space to in 2022."
Travel expert Francesca Page joined Cheddar's Baker Machado to break down how the omicron-fueled COVID-19 surge of cases on cruise ships is impacting the industry, as the CDC is actively monitoring at least 92 ships for outbreaks. Page also talked about the upcoming expiration of the CDC's conditional sailing order mandating mask-wearing and addressed passenger concerns. "Everyone is asking, financially, should I cancel my cruise should COVID surges keep going, which it looks they are, and to a large degree I think that decision is very personal and is based on one's own risk tolerance," she said.
