Fed cautions on faltering US economy as virus cases leap
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.”