The Journal Gazette
Thursday, July 30, 2020 1:00 am

Recovery depends on pandemic, Fed admits

Central bank sees dim road ahead, promises to continue support


WASHINGTON – The Federal Reserve expressed concern Wednesday that the persistent viral outbreak will be a drag on the economy and on hiring in the coming months and said it plans to keep its benchmark short-term interest rate pegged near zero to help provide support.

After its policy meeting, the Fed conceded in a statement that the coronavirus pandemic “will weigh heavily on economic activity, employment and inflation.” And, they added: “The path of the economy will depend significantly on the course of the virus” – an acknowledgement that uncertainty about when the health crisis might be solved has complicated the Fed's ability to set interest rate policy.

It's an observation that Chair Jerome Powell has made, in one way or another, for months as most states have succeeded only fitfully in controlling the virus and the ability of businesses to stay open. And it suggested that Powell and the Fed envision a prolonged recovery whose outcome will depend at least as much on the path of the virus as on the actions the Fed might take.

“A full recovery,” Powell said at a news conference, “is unlikely until people are confident that it is safe to engage in a broad range of activities.” In the meantime, he said, “We are committed to using our full range of tools to support the economy.”

The Fed announced no new policies in its statement. It said it will also continue to buy about $120 billion in Treasury and mortgage bonds each month, which are intended to inject cash into financial markets and spur borrowing and spending.

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