The meeting minutes underscore how Fed leaders view another stimulus package — one that reaches households, businesses and local governments still on the brink — as essential to a strong and stable recovery.
At the meeting, Fed leaders updated their estimates on unemployment in the coming years to reflect a sense of optimism that people were returning to work faster than expected. But in many cases those projections factored in some measure of more fiscal aid, the prospects of which were thrown into chaos Tuesday after Trump abruptly called off negotiations before then continuing to push for more talks on narrower targeted aid.
“If future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated,” according to the Fed minutes.
Fed policymakers also warned that, while the Cares Act was crucial for providing benefits to millions of families, Congress’s “support so far for households, businesses, and state and local governments might not provide sufficient relief to these sectors,” the minutes read. Fed leaders pointed to “the extent and timing of additional fiscal support” as another source of uncertainty, along with the economic toll of school and small-business closures, as well as bankruptcies.
On Tuesday, Fed Chair Jerome H. Powell again called on Congress to keep up the support, especially for pockets of the economy that were not experiencing a rebound. Speaking at the annual meeting of the National Association for Business Economics, Powell said that too-little support could ultimately lay a foundation for household insolvencies, business bankruptcies and meager wage growth.
“By contrast, the risks of overdoing it seem, for now, to be smaller,” Powell said Tuesday. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
But on Tuesday afternoon,