Eoin Treacy's view -
Federal Reserve policy makers on Wednesday highlighted the importance of fiscal stimulus for an economic recovery that recently has outperformed forecasts. Chairman Jerome Powell continued to wave the fiscal flag carefully at a congressional hearing -- amid a political stalemate over a new package -- saying that more support was likely to be necessary. Others were more full-throated, with Cleveland Fed President Loretta Mester saying it was very much needed given the “deep hole” the economy is climbing out of.
Chicago Fed President Charles Evans expressed concern the stimulus he penciled in won’t be forthcoming, while Boston Fed President Eric Rosengren suggested it’ll take another wave of infections to prompt action, and likely not until next year.
Declines in the stock market, until recently attributed to a reversal of excessive tech-share gains, have increasingly been attributed in part to worries about the recovery and the need for more stimulus. The S&P 500 Index was down 1.7% as of 2:22 p.m. in New York, the fifth drop in six days.
“The most difficult part of the recovery is still ahead of us,” Rosengren said in remarks Wednesday, saying he was more pessimistic than his colleagues over how many Americans will return to work over the next 15 months.
The impending bitter dispute between the Democrats and Republicans about the latter’s determination to approve a new supreme court justice before the election has pretty much shelved any hope of additional stimulus before the election. Add to that the real potential that an election result may not be immediately available and the timeline for when an additional fiscal stimulus will be agreed gets pushed further out.
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