· Powell says more policy help may be needed to pull the US out of economic downturn
Federal Reserve Chairman Jerome Powell said Wednesday that policymakers may have to use additional weapons to pull the country out of an economic mire that has cost at least 20 million jobs and caused “a level of pain that is hard to capture in words.”
While he did not specify what those measures are and where they would come from, Powell said the coronavirus has triggered a situation unlike previous recessions the U.S. has endured, and the response may have to be more from Congress than the Fed.
He noted the unprecedented strength of the fiscal and monetary measures already taken but stressed the importance of making sure that the deepest slump since the Great Depression does not get out of control. The Fed has cut its benchmark rate to near zero and instituted multiple lending and liquidity programs, while Congress has appropriated close to $3 trillion in rescue funding.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Powell said in prepared remarks for a webcast event with the Peterson Institute for International Economics.
House Democrats on Tuesday unveiled a new $3 trillion coronavirus relief bill, which if passed would likely face opposition in the Republican-led Senate. A House vote is expected on Friday.
During a question-and-answer session afterward, he said the Fed is not considering going to negative interest rates. “The committee’s view on negative rates really has not changed. This is not something that we’re looking at,” Powell said.
· Fed's Daly, echoing Powell, sees slow recovery, need for more support
It will likely take more than just a few months before the millions of Americans who have lost their jobs on fallout from the coronavirus pandemic will be able to get back to work, San Francisco Federal Reserve Bank President Mary Daly said on Wednesday.
With states reopening in phases, that “by definition translates to a slow recovery as we put toes in the water, see if the virus flares up when we go back to some economic activity,” she said in an interview on the SiriusXm program “Wharton.” “If it doesn’t, we can gain some momentum, people will be more confident; but if it does then people are going to be more cautious and that will slow the recovery even further.
“Whichever scenario occurs, this is going to be a slow recovery and not a sharp rebound,” she said
· Dollar erases losses after Powell sounds cautious on growth
The U.S. dollar erased losses to trade flat against a basket of currencies on Wednesday, after Federal Reserve Chair Jerome Powell rejected the idea of using negative interest rates as a stimulative tool, even as he sounded a gloomy note about economic growth.
In remarks webcast by the Peterson Institute for International Economics, Powell said the country could face an “extended period” of weak growth.
Economic recovery may take time, depending on progress fighting the coronavirus pandemic, he said.
The U.S. Dollar Currency Index, which measures the greenback’s strength against six major currencies, was little changed on the day at 100.02. The index slipped as low as 99.57 during the session.
Powell said the Fed’s view on negative interest rates has not changed and it is not something policy makers are looking at.
Traders of short-term U.S. interest-rate futures reduced bets the Fed will take the unprecedented step of pushing interest rates below zero. Yet futures contracts maturing in April 2021 and later still signaled expectations for negative rates, according to CME Group’s FedWatch tool.
U.S. President Donald Trump on Tuesday called for the U.S. to “accept the gift” of negative rates - as data showed that U.S. consumer prices dropped 0.8% in April, the largest decline since December 2008 during a recession.
The dollar index has traded in a tight range over the past few weeks but remains just 3% shy of a more than three-year high hit in late March, supported by heightened demand for safe havens as financial markets remain on edge about the economic impact of the pandemic.
· US producer prices tumble in April
U.S. producer prices fell more than expected in April, leading to the largest annual decline since 2015, which could bolster some economists’ predictions for a brief period of deflation as the novel coronavirus depresses demand.
The Labor Department said on Wednesday its producer price index for final demand tumbled 1.3% last month after slipping 0.2% in March. In the 12 months through April, the PPI decreased 1.2%. That was the biggest decline since November 2015 and followed a 0.7% increase in March.
· U.S. March, April job losses revised higher
The U.S. economy lost a record 20.537 million jobs in April and not 20.5 million as reported last Friday, according to revised data published by the Labor Department this week.
The Labor’s Department’s Bureau of Labor Statistics (BLS), which compiles the closely followed monthly employment report, also raised March’s job losses to show nonfarm payrolls decreasing 881,000 instead of 870,000 as previously estimated.
Employment gains for February were revised up to 251,000 from 230,000 as previously reported.
Nonfarm payrolls are calculated from a survey of establishments.
· Treasury's Mnuchin says U.S. will slowly reopen economy
U.S. Treasury Secretary Steven Mnuchin said on Wednesday the economy will be reopened slowly but he cautioned that waiting too long risked severe economic damage.
“We’re going to slowly open the economy,” Mnuchin told Fox News in an interview.
“But there is also a risk that we wait too long, there is a risk of destroying the U.S. economy and the health impact that that creates,” he said.
· All eyes on Detroit as automakers ready slow, careful reopening of plants
The U.S. factories that make Fords, Chevys and Jeeps are coming back to life this week as workers install new safety equipment and wake up machines ahead of the high-stakes restart the Detroit automakers plan to launch on Monday.
Ford Motor Co (F.N), General Motors Co (GM.N) and Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) all plan to reopen North American factories on May 18. The reopening of the U.S. auto sector will be a closely watched test of whether workers across a range of industries can return to factories in large numbers without a resurgence of COVID-19 infections. How well the automakers do will be significant for the U.S. economy, as nearly 1 million workers are employed in the sector.
· Oil sheds nearly 2% despite surprise US crude stock drawdown
Oil prices fell more than 1% on Wednesday despite the first decline in U.S. crude inventories since January, as markets were affected by a solemn address from U.S. Federal Reserve chairman warning that economic recovery from the coronavirus pandemic would take many months.
The markets have rallied in the last several days on optimism that fuel demand destruction has bottomed out and producers have aggressively cut production to deal with the supply glut due to the pandemic. However, with governments signaling a long period before activity rebounds, risk assets like stocks and oil slipped on Wednesday.
Brent crude fell 79 cents, or 2.6%, to settle at $29.19 per barrel, while West Texas Intermediate crude shed 49 cents, or 1.9%, to settle at $25.29 per barrel.
U.S. Federal Reserve Chair Jerome Powell gave a solemn assessment of the U.S. economy and renewed his skepticism of negative interest rates.
Reference: CNBC, Reuters
Thai
Eng