The Fed suggests the worst of this crisis is over

- Advertisement -

But that the road to recovery remains very long and challenging.

- Advertisement -
- Advertisement -
- Advertisement -

For over a month now, we’ve heard from economists and strategists that the worst of the pandemic-induced economic downturn may be over.

And the Federal Reserve on Wednesday said that they, too, see this as a possibility.

“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world,” the Fed said in its latest policy statement published Wednesday. “The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses.” (Emphasis added.)

In April, the Fed’s statement read: “The virus and the measures taken to protect public health are inducing sharp declines in economic activity and a surge in job losses.” (Emphasis added.)

This shift in tense — flagged by Luke Kawa on Twitter — signals that the Fed sees the most acute phase of the crisis as likely having passed.

“In recent weeks, some indicators suggest a stabilization or even a modest rebound in some segments of the economy,” Powell said Wednesday. Though as Powell elaborated during a nearly hour-long press conference Wednesday afternoon, this stabilization isn’t anything resembling an “all clear” for the U.S. economy.

“The extent of the downturn and the pace of recovery remain extraordinarily uncertain and will depend in large part on our success in containing the virus,” Powell added. “We all want to get back to normal, but a full recovery is unlikely to occur until people are confident that it is safe to reengage in a broad range of activities.”

On Wednesday, the Fed’s latest interest rate forecasts suggested there will be no interest rate hikes until 2023 at the earliest, a sign that anything resembling a “full recovery” in the economy is several years off.

Additionally, outlooks for GDP and unemployment suggested the economy will contract by 6.5% this year with unemployment remaining above 9% through year-end.

And as Powell said, the outlook is “extraordinarily uncertain” given volatility in the data, with the Fed chair specifically citing the May jobs report as an example of how uncertain pinning down progress in the economy remains. A re-emergence of the virus or a failure by Congress to continue supporting consumers and small businesses also pose considerable risks to the outlook.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, also highlighted in a note Wednesday that the Fed’s “median forecasts seem reasonable to us, if the median underpinning assumption is that a vaccine is widely available before the middle of next year.”

With Shepherdson adding that, “If not, all bets on the speed of the recovery are off.”

An outlook well inline with the view set forth by Powell on Wednesday.

This article was originally posted on finance.yahoo.com/news/.

Home of Science
Follow me

- Advertisement -

Discover

Sponsor

Latest

A Review of the Film A Walk to Remember (Movie Review)

A Review of the Film A Walk to Remember (Movie Review)Khalid, the character played by Geoffrey Rush in the film A Walk to...

What You Need to Know About Mesothelioma Causes

The mesothelioma causes which most people know about are either the exposure to asbestos or being exposed to asbestos fibres. Though exposure to asbestos...

Pelosi says Trump firing of State Department inspector general could be ‘unlawful’ if done in retaliation

KEY POINTS President Donald Trump’s surprise firing of the State Department’s internal watchdog could be “unlawful” if it was done in retaliation, House Speaker...

How to Watch All of Your Favorite Programs on Netflix

How to Watch All of Your Favorite Programs on NetflixIn this world of changing technology and increasing levels of technology, not everybody can...

How to Make Money on the Internet With Netflix

How to Make Money on the Internet With NetflixIf you want to learn how to make money on the internet, starting a Netflix...
Home of Science
Follow me