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Fed Weighs Next Steps to Fortify Economy Shaken by Virus Fed Weighs Next Steps to Fortify Economy Shaken by Virus
(about 1 month later)
Federal Reserve officials are wrapping up meetings on Wednesday after two months of nonstop action to avert financial calamity as the coronavirus roiled markets and upended the world economy. The gathering is a chance to consider how to position monetary policy for the trials ahead.Federal Reserve officials are wrapping up meetings on Wednesday after two months of nonstop action to avert financial calamity as the coronavirus roiled markets and upended the world economy. The gathering is a chance to consider how to position monetary policy for the trials ahead.
The Fed is now back on its regular schedule after two emergency meetings in March. At those sessions and in announcements since, it cut interest rates to zero, rolled out an unlimited bond-buying campaign and set up programs to smooth over corporate and government debt markets.The Fed is now back on its regular schedule after two emergency meetings in March. At those sessions and in announcements since, it cut interest rates to zero, rolled out an unlimited bond-buying campaign and set up programs to smooth over corporate and government debt markets.
Policymakers will issue a statement at 2 p.m., and the chair, Jerome H. Powell, will hold a news conference at 2:30.Policymakers will issue a statement at 2 p.m., and the chair, Jerome H. Powell, will hold a news conference at 2:30.
The Fed’s efforts to protect the economy have outstripped even its response to the 2008 financial crisis.The Fed’s efforts to protect the economy have outstripped even its response to the 2008 financial crisis.
Officials took weeks, not months, to slash interest rates to rock bottom. They have been buying bonds at a record pace, swelling their balance sheet to $6.6 trillion from less than $4.2 trillion in mid-February. And the Fed’s emergency lending authorities are reaching further this time: The central bank has said it will buy municipal debt and lend to both large and midsize companies, measures it did not take in the darkest days of the last crisis.Officials took weeks, not months, to slash interest rates to rock bottom. They have been buying bonds at a record pace, swelling their balance sheet to $6.6 trillion from less than $4.2 trillion in mid-February. And the Fed’s emergency lending authorities are reaching further this time: The central bank has said it will buy municipal debt and lend to both large and midsize companies, measures it did not take in the darkest days of the last crisis.
The monetary intervention reflects the economic shock at hand. The coronavirus outbreak gripped the world quickly and nearly completely, bringing the gears of modern capitalism — stores, offices, amusement parks and more — to a standstill. Grocers and Amazon cannot plug the gap as perhaps a fifth of U.S. workers lose jobs, conferences and weddings are canceled, and tens of millions are kept home to help stem the pandemic.The monetary intervention reflects the economic shock at hand. The coronavirus outbreak gripped the world quickly and nearly completely, bringing the gears of modern capitalism — stores, offices, amusement parks and more — to a standstill. Grocers and Amazon cannot plug the gap as perhaps a fifth of U.S. workers lose jobs, conferences and weddings are canceled, and tens of millions are kept home to help stem the pandemic.
For all of the Fed’s activism, its most challenging job comes next. The shock may begin to recede, but it is unclear how quickly the economy can rebound.For all of the Fed’s activism, its most challenging job comes next. The shock may begin to recede, but it is unclear how quickly the economy can rebound.
A first glimpse at the Fed’s playbook may come Wednesday. Policymakers could hint that they will leave interest rates unchanged for months or years, and some economists think they could offer guidance about their bond-buying plans. Analysts are divided over what details to expect, but one thing seems likely: Mr. Powell will pledge to do whatever it takes to get the country through a tight economic spot.A first glimpse at the Fed’s playbook may come Wednesday. Policymakers could hint that they will leave interest rates unchanged for months or years, and some economists think they could offer guidance about their bond-buying plans. Analysts are divided over what details to expect, but one thing seems likely: Mr. Powell will pledge to do whatever it takes to get the country through a tight economic spot.
“This is a transition meeting for them,” said Michael Gapen, chief United States economist at Barclays. It’s “the end of the beginning, not the beginning of the end.”“This is a transition meeting for them,” said Michael Gapen, chief United States economist at Barclays. It’s “the end of the beginning, not the beginning of the end.”
The financial system remains relatively stable, thanks in part to the central bank’s March efforts, which traders and strategists say kept key bond markets functioning. As a result, credit can continue flowing to businesses and households in need of cash. That’s an important advantage over 2008, when a banking crisis helped to tip off the longest and worst downturn since the Great Depression.The financial system remains relatively stable, thanks in part to the central bank’s March efforts, which traders and strategists say kept key bond markets functioning. As a result, credit can continue flowing to businesses and households in need of cash. That’s an important advantage over 2008, when a banking crisis helped to tip off the longest and worst downturn since the Great Depression.
But the economy is a system with many moving parts, so the trajectory and timing of a recovery are unknowable.But the economy is a system with many moving parts, so the trajectory and timing of a recovery are unknowable.
Consumers, for example, fuel about 70 percent of the economy. Many have either gone without a paycheck for all or part of the quarantine period or know someone who has. If that makes them more skittish about spending, they could hamstring a recovery.Consumers, for example, fuel about 70 percent of the economy. Many have either gone without a paycheck for all or part of the quarantine period or know someone who has. If that makes them more skittish about spending, they could hamstring a recovery.
States are another case in point. After the last recession, state and local budget shortfalls led to public sector layoffs that slowed an already weak crawl back to prosperity. This time, governments have taken an intense hit, threatening again to hold back an economic rebound.States are another case in point. After the last recession, state and local budget shortfalls led to public sector layoffs that slowed an already weak crawl back to prosperity. This time, governments have taken an intense hit, threatening again to hold back an economic rebound.
The Fed is setting up emergency programs to help with short-term problems, allowing companies and governments to fund operations more easily.The Fed is setting up emergency programs to help with short-term problems, allowing companies and governments to fund operations more easily.
Officials have been rolling out lending facilities, backed by $454 billion that Congress deposited at the Treasury. One program will buy debt from states, cities and counties, most of it highly rated, helping local governments to meet their cash needs. Two other programs will buy corporate debt, and the promise that they are coming has helped big companies in the credit markets.Officials have been rolling out lending facilities, backed by $454 billion that Congress deposited at the Treasury. One program will buy debt from states, cities and counties, most of it highly rated, helping local governments to meet their cash needs. Two other programs will buy corporate debt, and the promise that they are coming has helped big companies in the credit markets.
Mr. Powell could use his news conference to hash out what comes next for the emergency lending programs. The central bank has earmarked less than half of the funding Congress gave the Treasury to protect against credit losses, so there is plenty left. Many programs are not yet operating.Mr. Powell could use his news conference to hash out what comes next for the emergency lending programs. The central bank has earmarked less than half of the funding Congress gave the Treasury to protect against credit losses, so there is plenty left. Many programs are not yet operating.
“You have to get the programs all up and running,” said Michael Feroli, chief U.S. economist at J.P. Morgan. If it’s like throwing spaghetti at the wall, “you have to see what spaghetti sticks.”“You have to get the programs all up and running,” said Michael Feroli, chief U.S. economist at J.P. Morgan. If it’s like throwing spaghetti at the wall, “you have to see what spaghetti sticks.”
Updated June 2, 2020
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
Emergency lending programs are aimed more at keeping markets orderly than at stimulating the economy. When it comes to promoting growth, the Fed has limited room: Borrowing costs are already at rock-bottom, and officials have signaled their aversion to negative interest rates.Emergency lending programs are aimed more at keeping markets orderly than at stimulating the economy. When it comes to promoting growth, the Fed has limited room: Borrowing costs are already at rock-bottom, and officials have signaled their aversion to negative interest rates.
But there are levers to pull. The Fed could make its bond-buying plans more concrete at this meeting, though many economists think that it will wait for more economic clarity. Officials could also pledge to leave interest rates unchanged for an extended period.But there are levers to pull. The Fed could make its bond-buying plans more concrete at this meeting, though many economists think that it will wait for more economic clarity. Officials could also pledge to leave interest rates unchanged for an extended period.
“We expect an overarching commitment that the Fed will use all its tools aggressively to help restore the economy to full employment as rapidly as possible with inflation sustainably at target,” economists at Evercore ISI wrote in a note previewing the meeting.“We expect an overarching commitment that the Fed will use all its tools aggressively to help restore the economy to full employment as rapidly as possible with inflation sustainably at target,” economists at Evercore ISI wrote in a note previewing the meeting.
Mr. Powell may also indicate the Fed’s thinking about its limitations — for example, whether it can continue to buy securities without consequence.Mr. Powell may also indicate the Fed’s thinking about its limitations — for example, whether it can continue to buy securities without consequence.
And he could emphasize that if economic shutdowns lift slowly and companies need grants instead of loans to survive, a remedy will fall to Congress.And he could emphasize that if economic shutdowns lift slowly and companies need grants instead of loans to survive, a remedy will fall to Congress.
“These are lending powers, not spending powers,” Mr. Powell said on April 9, after the Fed unveiled many of its newest programs. “The Fed is not authorized to grant money to particular beneficiaries.”“These are lending powers, not spending powers,” Mr. Powell said on April 9, after the Fed unveiled many of its newest programs. “The Fed is not authorized to grant money to particular beneficiaries.”