Fed to weigh reopening at key meeting
WASHINGTON: The Federal Reserve will meet this week for the first time since US states began easing shutdowns imposed to stop the coronavirus pandemic, unexpectedly boosting employment numbers after two months of massive layoffs.
The world’s largest economy added 2.5 million jobs and the unemployment rate fell in May, according to the Labour Department, even as Covid-19 remains a threat to daily life.
The Fed moved swiftly and aggressively as soon as the pandemic struck, even before businesses were shut down nationwide, as the policy-setting Federal Open Market Committee (FOMC) slashed its key lending rate to zero in March.
The central bank also rolled out trillions of dollars in liquidity to support battered markets, and provide lending to large and medium businesses as well as state and local governments.
And Fed chair Jerome Powell has vowed to do more, if necessary.
President Donald Trump who is counting on a solid economic recovery to boost his chances of winning a second term in November, cheered the better-than-expected job numbers.
But despite the unexpected good news the economy remains in trouble and BBVA’S chief US economist Nathaniel Karp does not expect the FOMC to waver from its stance any time soon.
“While there are some early signs that the worst part of the crisis has passed, we expect that the Fed will reaffirm its commitment to doing whatever it takes while also reflecting on how the committee is viewing the current crisis,” he said.
The virus itself remains a real threat, with cases continuing to climb in the United States, home to the world’s worst outbreak with more than 108,000 dead – meaning life and commerce are not yet back to normal. Powell has warned of the dire state of the US economy, and said economic data in the April-june quarter “will be very, very bad” – potentially falling 20% to 30%.
“There will be a big decline in economic activity, big increase in unemployment,” he said in a CBS interview last month.