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.
President Joe Biden named Jerome Powell, initially appointed by President Trump, to keep his seat as the chair of the Federal Reserve on Monday amid the ongoing challenges of the pandemic, inflation, and unemployment. David Beckworth, a former international economist for the Treasury Department and a senior fellow with the Mercatus Center, joined Cheddar to discuss what he sees as the practicality of Biden's decision. "What Powell brings to the table is he's built up political capital with Republicans and Democrats," he said. "It's easy for him to get the job done. I think in one way he was the path of least resistance for the president."
As housing prices continues to rise, Tim Rood, managing director at the real estate finance solutions company SitusAMC, joined Cheddar's "Closing Bell" to talk about what is driving up the costs, attributing it to supply chain constraints and regulatory expenses. Rood stated that the federal government's response to the 2008 financial crisis has added to the growing price tags. "The government came down super hard on banks and independent mortgage companies because of the defaults," he said.
Colleen Kelly, CEO of Concern Worldwide US, joined Cheddar to discuss food insecurity concerns as the cost of this year's Thanksgiving dinner has surged amid record inflation. Kelly also talked about the ongoing issues derailing global supply chains and raising food prices, which undercuts efforts to tackle food insecurity in the United States and around the world. "Everything that hits the U.S. hits countries that are in extreme poverty even harder, and as you can imagine there were three major things affecting this in the last year: climate change, COVID, and conflict," she said.
Papa Johns has a new look for its logo, graphics, and storefronts. CEO Rob Lynch joined Cheddar's "Closing Bell" to talk about the timing of the rebrand following its ongoing success through the pandemic. Patrons entering revamped locations will notice a lack of menu boards thanks to customer smartphone use and glass panels to allow customers to watch pizzas being made by hand. "Everyone has a menu board in their pocket in the form of their phone," Lynch said. "Eighty percent of our business is ordered digitally, whether it's web-based or our fastest-growing channel being app-based."
In a surprise turn of events, Elizabeth Holmes took the stand in her own defense on Friday and is expected to continue her testimony later today. Holmes, who founded a blood testing start-up Theranos back in 2003, faces 11 counts of wire fraud as well as conspiracy to commit wire fraud. Aron Solomon, Chief Legal Analyst, Esquire Digital joined Cheddar's Opening Bell to discuss.
NFL Hall of Famer Jerry Rice and his daughter/business partner Jaqui Rice Gold joined Cheddar's "Between Bells" to talk about their energy drink G.O.A.T. Fuel. The pair talked about launching the brand during the height of the pandemic and what makes it different from competing brands. "The thing that separates us from the other energy drinks is we have cordyceps mushrooms in the drink," he said. "You're not going to have the jitters or anything like that." The duo also discussed the Los Angeles Lakers making it the official energy drink of its organization and what that means for the growth of the brand.
Rapper and singer T-Pain is teaming up with Google this holiday season to encourage shoppers to support Black-owned businesses on Black Friday. Stephanie Horton, the director of marketing for Google Shopping, joined Cheddar to provide some details about T-Pain's new song, featuring Normani, in a new shoppable interactive film for the promotion. She also explained how Google worked with local artists in various states to create shoppable murals, where products seen in the artwork are discoverable online by simply pointing your camera at it.
Caleb Silver, the Editor-in-Chief for Investopedia, joined Wake Up With Cheddar to break down the latest in the Activision Blizzard sexual misconduct scandal. After 1,700 of the embattled video game maker's employees signed a petition demanding CEO Bobby Kotick step down, Kotick reportedly said he would step down if he can't turn the toxic workplace culture around quickly. Silver noted that the allegations go back years with settlements and lawsuits that indicate Kotick would have to be claiming ignorance of his own business or deliberately obfuscating his knowledge of what happened under his watch.
An Apple memo is apparently encouraging its employees to feel comfortable to freely discuss workplace concerns like wages and paid time off following allegations that employees were fired for communicating about issues of pay, workplace safety, and harassment.
