Federal Reserve officials expressed concern at their most recent meeting that the US economic recovery could falter if Congress fails to approve another round of pandemic relief.

Minutes of the meeting showed that officials believe the economy was growing faster than expected. But they based their forecasts on expectations that Democrats and Republicans would resolve their differences and provide more economic aid, including expanded unemployment benefits and help for small businesses.

The minutes said that “most forecasters were assuming that an additional pandemic-related fiscal package would be approved this year, and noted that, absent a new package, growth could decelerate at a faster-than-expected pace in the fourth quarter.”

The prospects for a new package being passed before the Nov. 3 elections, however, have significantly diminished with President Trump’s decision to end negotiations with Democrats. Trump has instead proposed that Democrats approve individual rescue items, such as money for ailing airlines and another round of $1,200 checks for most adults, rather than a comprehensive aid package.

Federal Reserve chairman Jerome Powell warned in a speech Tuesday of potentially tragic consequences if Congress and the White House do not provide further assistance, saying “the [economic] expansion is far from complete.”

The minutes covered the Fed’s Sept. 15-16 meeting, in which officials left their key policy rate unchanged at a record low near zero and signaled that they expected to keep rates at ultra-low levels at least through 2023.

The Fed’s statement incorporated a policy change to allow inflation to rise above its 2 percent target for a period of time. That change is seen as allowing it to keep interest rates lower for a longer period.

The September statement was approved on a 10-2 vote. The minutes recognized large problems in trying to forecast the path of the economy.

“Participants continued to

By Sergio Goncalves and Miguel Pereira

LISBON (Reuters) – Portugal’s bicycle makers feared for their future when the coronavirus pandemic forced them in March to shut for two months but 2020 now looks set to be a bumper year as people shun public transport and opt for healthier ways of getting around.

Portugal, Europe’s largest manufacturer of bicycles, had to shut its nearly 40 factories and put their 8,000-strong workforce on furlough to help curb the spread of COVID-19, but is now struggling to keep up with booming global demand.

“When we closed on March 13, we thought it would be a catastrophe, we were scared,” said Bruno Salgado, executive board member of RTE Bikes, which owns Europe’s largest bike factory, in the city of Gaia, in northern Portugal.

“But it turned out to be a blessing in disguise for us,” said Salgado, standing between two busy production lines at the factory, which produced 1.1 million bicycles last year.

Related slideshow: Sectors showing resilience during the COVID-19 pandemic (Provided by Photo Services)


If the 2008 U.S. green stimulus is any indicator, the signs are not encouraging

Central bankers and policy makers in the Western world are including some version of green stimulus in the large stimulus packages aimed to boost their COVID-19 stricken economies.   For instance, Christine Lagarde, President of the European Central Bank (ECB), has pledged to devote a portion of the ECB’s 2.8 trillion Euro asset purchase program to pursue green objectives in a bid to fight climate change. Joe Biden, the Democratic presidential nominee, has announced a plan to spend $2 trillion on climate change as a way to stimulate the economy.

But how does one ensure that it is money well spent? What does “well spent” even mean? Most economists would argue that as long as the “social rate of return” on the investment is higher than the interest rate paid on the debt taken to finance the investment, the extra debt is well spent. How does one measure the “social rate of return” on green stimulus? The benefits could be financial: lower fuel and maintenance costs and non-financial: lower carbon emissions, improved health outcomes of citizenry, incremental new jobs that otherwise might not be created and environmental benefits. 

The financial part, by definition, is easier to measure. The non-financial portion involves a whole host of assumptions including estimates of new jobs created, the price per ton of carbon emissions

WASHINGTON—A pair of top U.S. policy makers said Tuesday that rules to make money-market mutual funds less susceptible to runs likely need to be improved after a bout of turmoil in March that prompted the Federal Reserve to intervene.

“There’s no doubt that we need to re-examine the reforms of the last time,” Securities and Exchange Commission Chairman Jay Clayton said on a virtual panel Tuesday. He was referring to a 2014 attempt by the SEC to address the causes of an exodus from money markets that contributed to the last financial crisis.

So-called prime money-market funds are an important source of short-term financing for many U.S. companies, including banks. For investors, they often offer higher returns than savings accounts. But while the funds are considered nearly as safe as cash by market participants, they are subject to investment risk and—at least in theory—aren’t federally insured like bank accounts.

‘It is worth asking whether there are ways to enhance the liquidity resources available to funds,’ Deputy Treasury Secretary Justin Muzinich said Tuesday.


Marlene Awaad/Bloomberg News

In practice, money-market mutual funds are important enough to the plumbing of the U.S. financial system that the federal government has stepped in to backstop them twice in the past 12 years. That, some say, risks creating an implicit guarantee for a class of investment products that taxpayers shouldn’t have to bail out. All told, money-market funds, including tax-exempt funds and those that invest in government securities, hold about $4.4 trillion, according to the Investment Company Institute.

The most recent intervention, in which the Fed began providing liquidity to money-market funds during the coronavirus-induced market panic of March, raised questions about whether the SEC’s 2014 reforms went far enough.

In the midst of pressure from the mutual-fund industry, the SEC declined to adopt a