Amid the uncertainty surrounding the US election, the Fed is prone to be at a low degree this week. From Reuters
© Reuters. FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington
By Howard Schneider
WASHINGTON (Reuters) – The Federal Reserve is expected to release its latest policy statement on Thursday after two days of debate in which policy-makers were missing key information: Who will rule the United States for the next four years?
With the final outcome of Tuesday’s presidential election still uncertain, the Federal Open Market Committee of the US Federal Reserve is expected to stick to its last statement and reiterate its commitment to do whatever it takes to help the economy through the coronavirus-triggered recession help.
Until it is clear who the next US president will be, “it is the wrong time to be public,” said William English, former Fed chief financial officer and now professor at the Yale School of Management.
“Most of the time you don’t want to create additional uncertainty at this point. So you would aim for a fairly quiet meeting,” he said in a recent interview with Reuters.
The Fed’s latest policy statement, due to be released at 2:00 p.m. EST (1900 GMT), will update the central bank’s view of the economy and likely reiterate its previous promise to keep its policy rate near zero overnight until the US job market returns “maximum” employment has been reached and inflation are on track to exceed the 2% target “for some time”.
Fed Chairman Jerome Powell is expected to hold a press conference at 2:30 p.m. EST.
Chart – The Risks for Fed Inflation: https://graphics.reuters.com/USA-FED/ELECTION/rlgvdxbnmvo/chart.png
At least the financial markets reacted calmly to the unresolved presidential election on Wednesday and relieved the Fed of a possible additional problem. The major US equity indices rose for a third straight day while US Treasury yields fell. Roberto Perli, an analyst at Cornerstone Macro, said the decline in yields offered “no fundamental story” about investor perceptions of electoral risk or the path of economic recovery.
The policies that Democratic presidential candidate Joe Biden is expected to adopt when he is ultimately declared victorious on Tuesday may differ significantly from the policies that Republican President Donald Trump would pursue in a second term, and could change the US prospect -Investors are changing fiscal and health policies as well as expectations for growth and inflation.
Votes were still being counted by Thursday afternoon in a number of battlefield states, with Biden leading the way in two critical Midwestern states that could sway the election in his favor.
What can be asked of the central bank in the coming months depends not only on the policies of the next president, but also on what is approved by a Congress that is likely to remain divided, with Democrats controlling the House of Representatives and Republicans running the Senate. In the run-up to the elections, the two chambers were unable to agree on further tax measures to support the economy as the virus continued to spread.
In the United States, more than 232,000 people have died from COVID-19, the disease caused by the virus.
The recession following this health crisis has left millions of people unemployed. By September, the number of employees was estimated to be 12 million less than it would have been if the pre-pandemic of employment growth had continued from March onwards. The US Department of Labor is expected to release its closely watched monthly employment report for October on Friday. Many analysts believe the pace of employment growth will slow to a point where it could possibly take years to fully recover.
Graphics – The Risks for the Fed Jobs: https://graphics.reuters.com/USA-FED/ELECTION/oakvenlakpr/chart.png
According to a Reuters poll of economists, the number of non-farm workers is expected to have increased by 600,000 in the last month. The average monthly increase from May to September was 2.2 million jobs.
“A full restoration of jobs … will be a lengthy process, shaped primarily by the health crisis,” Rubeela Farooqi, chief economist for the US radio frequency economics, wrote this week.