Fed cau­tions on fal­ter­ing US econ­omy as virus cases leap

The Daily Telegraph - Business - - Front Page - Tom Rees By

THE Fed­eral Re­serve has warned that Amer­ica’s re­cov­ery is stalling as rock­et­ing Covid-19 infections force states to re­verse re­open­ings.

Cen­tral bank chiefs said the fate of the econ­omy will “de­pend sig­nif­i­cantly on the course of the virus” and vowed to keep in­ter­est rates at rock-bot­tom lev­els to sup­port businesses and con­sumers. The pledge sent stocks ris­ing on Wall Street, with the S&P 500 up al­most 1pc.

Infections in the US have jumped since the end of June and deaths are now start­ing to spike, push­ing the likes of Florida, Cal­i­for­nia and Texas to shut down parts of their econ­omy again.

Fed chair­man Jerome Pow­ell vowed to do “what we can for as long as it takes to pro­vide some re­lief and sta­bil­ity”. He said: “We have seen some signs in re­cent weeks that the in­crease in virus cases and the re­newed mea­sures to con­trol it are start­ing to weigh on eco­nomic ac­tiv­ity.

Mr Pow­ell added that a full eco­nomic re­cov­ery is un­likely un­til peo­ple are “con­fi­dent that it is safe to re-en­gage in a broad range of ac­tiv­i­ties”. He high­lighted de­clin­ing con­sumer spend­ing and slow­ing jobs growth.

Fed pol­i­cy­mak­ers voted unan­i­mously to hold rates steady be­tween a range of 0pc and 0.25pc and re­peated their pledge to use a “full range of tools to sup­port the US econ­omy”.

Its rate-set­ters warned the Covid-19 cri­sis will “weigh heav­ily” on ac­tiv­ity and poses “con­sid­er­able risks” to the eco­nomic out­look.

The Fed­eral Open Mar­ket Com­mit­tee said: “Fol­low­ing sharp de­clines, eco­nomic ac­tiv­ity and em­ploy­ment have picked up some­what in re­cent months but re­main well below their lev­els at the be­gin­ning of the year.”

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