The Fed meets in full rebound Covid-19 in the United States

La Fed se réunit en plein rebond de Covid-19 aux Etats-Unis

The u.s. central Bank held Tuesday and Wednesday, its meeting the monetary, at the same time as the worrying new rise in cases of coronavirus in the United States has forced a large part of the country to close their businesses and reconnect with containment measures.

These new closures were very critical of the business community, but it is unlikely that the u.s. federal Reserve (Fed) to take a specific action this week.

“The subject should not be mentioned in the press release” which will be published Wednesday at the end of the meeting, anticipates Mickey Levy, chief economist of Berenberg Markets, questioned by the AFP.

The president Jerome Powell could address it during the press conference that will follow, and ensure that the Fed “is prepared to act if necessary to provide more support to the economy”, he thinks.

The United States were optimistic in June. The rapid reopening of the shops, restaurants, beaches, under the leadership of president Donald Trump, had to leave the consumption, the engine of the american economy. Unemployment, lower-than-expected in may, had even started to decline in June.

But infection have bounced back from the end of the month. California, Florida, Texas… many States have had to backtrack.

Layoffs of employees retained good year, bad year since the end of march, or freshly re-hired, shall have the same rise with jobless claims in mid-July, for the first time since the end of march.

Anthony Fauci, immunologist and White House adviser, has recommended that the States most affected don’t reopen their economies on Friday in an interview with the Washington Post.

Uncertainty

“The Fed will focus on the forecasting uncertainty”, but “is not going to change policy,” says Mickey Levy.

Since the month of march, the Fed has implemented multiple measures to allow the economy to continue to function.

“It should not leave much of this meeting”, also anticipated Jonathan Millar, chief economist for the investment bank Barclays.

Nothing to be expected in any case on the side of the interest rate: the Fed had lowered to zero in mid-march in front of the advance of the pandemic and the widespread use of containment measures in the United States.

The officials of the institution have continued ever since to repeat that they would at this level as long as the economy will not be out of this crisis.

As to adopt negative interest rates, as did the central Banks of switzerland and japan, all have swept away this hypothesis, “not adapted to the context of the United States”.

The markets expect unanimous that the rate will remain in their current range of 0 to 0.25%, based on the evaluation of futures products from CME Group.

Negotiations in Congress

“We expect the president Powell that he remains very cautious. It will continue to stress the +great risks weighing on the economic outlook in the medium term+”, also believes Kathy Bostjancic, from Oxford Economics.

She also feels that”it will support the efforts of the Congress”, who are currently negotiating additional incentives, including the extension of assistance to the unemployed, new loans to SMES, another cheque for the individuals and funds to enable schools to re-open.

The Fed might recommend wearing a mask, as already seen in several of its leaders? “I would be surprised if they make a statement as policy,” says Jonathan Millar.

Several airlines, supermarket chains and even Mcdonald’s restaurants have very recently made it mandatory for the wearing of the mask for their clients.

This topic has become a political marker in the United States. Donald Trump, who advocated the freedom and refused to wear one in public, now recommends the port.

The Fed is expected to fall to 6.5% of the u.s. GDP in 2020, before a strong rebound of 5% in 2021, and more modest growth (3.5 per cent) in 2022.

GDP declined by 4.8% in the first quarter. The second quarter will be published on Thursday.

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