US Fed signals readiness to do more for economy as coronavirus rages

Central bank officials express concern Congress has failed to provide further aid for struggling people and businesses

The central bank has been buying Treasury and mortgage bonds to hold down long-term borrowing rates. Reuters

The Federal Reserve kept its benchmark interest rate at a record low near zero on Thursday and signalled its readiness to do more to support an economy under threat from a worsening coronavirus pandemic.

The Fed announced no new action after its latest policy meeting but left the door open to provide further assistance in coming months.

The central bank again pledged to use its “full range of tools to support the US economy in this challenging time”.

The economy in recent weeks has weakened after a tentative recovery from the deep pandemic recession in early spring.

Several Fed officials have expressed concern that Congress has failed so far to provide further aid for struggling people and businesses.

But the Fed’s policy statement, issued after a two-day meeting, made no mention of politicians’ failure to act.

A multitrillion-dollar stimulus, enacted in the spring, helped to sustain jobless Americans and ailing businesses but has since expired.

The failure of politicians to agree on any new rescue package has clouded the future for the unemployed, small businesses and the whole economy.

There is some hope, though, that the deadlock can be broken and more economic relief can be enacted during a post-election session of Congress between now and early January.

The central bank has been buying Treasury and mortgage bonds to hold down long-term borrowing rates and encourage spending.

And it has kept its key short-term rate, which influences many corporate and personal loans, near zero.

Some economists think the policymakers’ next move will be to expand its bond-buying, which is intended to boost the economy by lowering longer-term borrowing rates.

The Fed’s latest policy meeting coincided with an anxiety-ridden election week and an escalation of the virus across the country.

Most economists warn that the economy cannot make a sustained recovery until the pandemic is brought under control and most Americans are confident enough to return to their normal habits of shopping, travelling, dining and gathering in groups.

The central bank’s policy statement Thursday was approved in a 10-0 vote.

Robert Kaplan, president of the Federal Reserve Bank of Dallas, who dissented at the previous meeting, voted with the majority this time.

Another dissenter in September, Neel Kashkari, head of the Minneapolis Fed, was absent.

Mr Kashkari's alternate, Mary Daly of the San Francisco Fed, approved the statement, which was nearly identical to the one the Fed issued in September.

At that meeting, it adopted a policy goal change it made in August to keep rates low for some time even after inflation hits its 2 per cent annual target.

The reason was to allow the Fed to supply a longer boost to the economy and for unemployment to fall further before the policymakers begin to worry about inflation.