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Fed Leaves Rates Unchanged and Projects Years of High Unemployment Fed Leaves Rates Unchanged and Projects Years of High Unemployment
(8 days later)
WASHINGTON — The Federal Reserve on Wednesday said it would leave interest rates near zero for the foreseeable future as the central bank projected high unemployment for several years and a long slog back from the pandemic-induced recession.WASHINGTON — The Federal Reserve on Wednesday said it would leave interest rates near zero for the foreseeable future as the central bank projected high unemployment for several years and a long slog back from the pandemic-induced recession.
In their first economic projections this year, Fed officials indicated that they expect the unemployment rate to end 2020 at 9.3 percent and remain elevated for some time, coming in at 5.5 percent in 2022. That would be well above the level they expect to prevail over the longer run in a healthy economy and far above the historically low jobless rates that preceded the virus.In their first economic projections this year, Fed officials indicated that they expect the unemployment rate to end 2020 at 9.3 percent and remain elevated for some time, coming in at 5.5 percent in 2022. That would be well above the level they expect to prevail over the longer run in a healthy economy and far above the historically low jobless rates that preceded the virus.
”Many millions have lost their jobs,” Fed Chair Jerome H. Powell said at a news conference following the Fed’s two-day policy meeting, adding the extent of the downturn and pace of the recovery remain “extraordinarily uncertain.””Many millions have lost their jobs,” Fed Chair Jerome H. Powell said at a news conference following the Fed’s two-day policy meeting, adding the extent of the downturn and pace of the recovery remain “extraordinarily uncertain.”
Mr. Powell said the Fed will do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.Mr. Powell said the Fed will do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.
That includes keeping rates near rock-bottom for the foreseeable future, Mr. Powell said, noting there would likely be no rate increase through at least 2022.That includes keeping rates near rock-bottom for the foreseeable future, Mr. Powell said, noting there would likely be no rate increase through at least 2022.
“We do think that this is going to take some time — I think most forecasters believe that,” Mr. Powell said.“We do think that this is going to take some time — I think most forecasters believe that,” Mr. Powell said.
The Fed is projecting a particularly sharp economic hit in 2020, with officials expecting output to contract by 6.5 percent at the end of this year compared to the final quarter of 2019, before rebounding by 5 percent in 2021.The Fed is projecting a particularly sharp economic hit in 2020, with officials expecting output to contract by 6.5 percent at the end of this year compared to the final quarter of 2019, before rebounding by 5 percent in 2021.
The new forecasts predict a far slower path back to economic strength than the Trump administration — and perhaps the stock market — seems to expect as the economy climbs out of a virus-spurred downturn. The Fed skipped its quarterly economic summary in March as the pandemic gripped the United States, sowing uncertainty as business activity came to a near standstill.The new forecasts predict a far slower path back to economic strength than the Trump administration — and perhaps the stock market — seems to expect as the economy climbs out of a virus-spurred downturn. The Fed skipped its quarterly economic summary in March as the pandemic gripped the United States, sowing uncertainty as business activity came to a near standstill.
On Wednesday, it painted a grim picture of the path ahead, with millions remaining out of work for the next several quarters and gross domestic product embarking on a slow climb from its trough.On Wednesday, it painted a grim picture of the path ahead, with millions remaining out of work for the next several quarters and gross domestic product embarking on a slow climb from its trough.
“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the Fed said in the post-meeting statement that accompanied the data outlook.“The ongoing public health crisis will weigh heavily on economic activity, employment and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the Fed said in the post-meeting statement that accompanied the data outlook.
In addition to keeping borrowing costs low, the Fed pledged to continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, though they would “closely monitor developments” and were prepared to adjust those plans “as appropriate.”In addition to keeping borrowing costs low, the Fed pledged to continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, though they would “closely monitor developments” and were prepared to adjust those plans “as appropriate.”
The last time the Fed released projections was in December, when officials expected 2020 unemployment to close out at 3.5 percent with 1.9 percent inflation and 2 percent growth.The last time the Fed released projections was in December, when officials expected 2020 unemployment to close out at 3.5 percent with 1.9 percent inflation and 2 percent growth.
The coronavirus upended that outlook. Unemployment rocketed to 14.7 percent in April before easing to 13.3 percent in May. Economic activity tanked so sharply as states issued stay-at-home orders in March and April that the National Bureau of Economic Research announced this week that the United States entered a recession after the economy peaked in February.The coronavirus upended that outlook. Unemployment rocketed to 14.7 percent in April before easing to 13.3 percent in May. Economic activity tanked so sharply as states issued stay-at-home orders in March and April that the National Bureau of Economic Research announced this week that the United States entered a recession after the economy peaked in February.
The central bank’s release came hours after the Organization for Economic Cooperation and Development put out a report warning that the world economy faces the most severe downturn in a century and could experience a halting rebound.The central bank’s release came hours after the Organization for Economic Cooperation and Development put out a report warning that the world economy faces the most severe downturn in a century and could experience a halting rebound.
“Extraordinary policies will be needed to walk the tightrope towards recovery,” said Laurence Boone, the O.E.C.D.’s chief economist.“Extraordinary policies will be needed to walk the tightrope towards recovery,” said Laurence Boone, the O.E.C.D.’s chief economist.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
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.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
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.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
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.)
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.
The Fed’s caution and the O.E.C.D.’s pessimism contrasts with the more optimistic tone Treasury Secretary Steven Mnuchin took while testifying before Senators on Wednesday. He said in prepared remarks that the economy was “well-positioned for a strong, phased reopening of our country,” though he noted during the testimony itself that some sectors had sustained “significant damage.”The Fed’s caution and the O.E.C.D.’s pessimism contrasts with the more optimistic tone Treasury Secretary Steven Mnuchin took while testifying before Senators on Wednesday. He said in prepared remarks that the economy was “well-positioned for a strong, phased reopening of our country,” though he noted during the testimony itself that some sectors had sustained “significant damage.”
And those messages are very different from the one coming from President Trump, who has been celebrating on Twitter as stock indexes rally.And those messages are very different from the one coming from President Trump, who has been celebrating on Twitter as stock indexes rally.
“NASDAQ HITS ALL-TIME HIGH. Tremendous progress being made, way ahead of schedule. USA!” he wrote on Twitter earlier on Wednesday.“NASDAQ HITS ALL-TIME HIGH. Tremendous progress being made, way ahead of schedule. USA!” he wrote on Twitter earlier on Wednesday.
Mr. Powell has emerged as a voice of economic caution since the pandemic took hold. He has warned that both monetary and fiscal policy must stand ready to do more to make sure the pandemic does not permanently scar the economy, and he has been clear that the Fed does not mistake its early successes in calming markets and reinvigorating lending as giving an all-clear signal.Mr. Powell has emerged as a voice of economic caution since the pandemic took hold. He has warned that both monetary and fiscal policy must stand ready to do more to make sure the pandemic does not permanently scar the economy, and he has been clear that the Fed does not mistake its early successes in calming markets and reinvigorating lending as giving an all-clear signal.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risk,” Mr. Powell said on May 13.“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risk,” Mr. Powell said on May 13.
Since then, some data points have come in above expectations. Unemployment was projected to increase to around 20 percent but it declined instead. Consumer spending is rebounding, though it remains below its level before the virus, based on real-time trackers.Since then, some data points have come in above expectations. Unemployment was projected to increase to around 20 percent but it declined instead. Consumer spending is rebounding, though it remains below its level before the virus, based on real-time trackers.
The central bank has taken extraordinary steps already to support the U.S. economy. The Fed cut interest rates to near zero in a series of back-to-back meetings in March. It has been snapping up government-backed bonds to keep markets functioning normally, and has rolled out a series of emergency credit programs aimed at ensuring that businesses and state and local governments can borrow money.The central bank has taken extraordinary steps already to support the U.S. economy. The Fed cut interest rates to near zero in a series of back-to-back meetings in March. It has been snapping up government-backed bonds to keep markets functioning normally, and has rolled out a series of emergency credit programs aimed at ensuring that businesses and state and local governments can borrow money.
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