WASHINGTON—Members of the Federal Open Market Committee (FOMC) agreed that the effects of the coronavirus outbreak and ongoing pandemic would continue to weigh heavily on economic activity, employment, and inflation in the near term, according to minutes from the committee's April videoconference meeting.
“The minutes from the April FOMC meeting show that the committee is comfortable that its present approach to monetary policy is providing support for the economy, but that a high degree of downside risk remains which could prompt more action," said NAFCU Chief Economist and Vice President of Research Curt Long.
"There was no discussion of negative interest rates and Fed officials have been quick to downplay their potential use," Long added. "Rather, the Fed seems intent on expanding the use of forward guidance and quantitative easing should the need arise.”
Of note, members expressed concerns that a large number of small businesses may not be able to endure a potential shock with long-lasting financial effects, highlighting that even after social-distancing requirements ease, some business models may no longer be economically viable.
Other Revelations
Long said minutes released also revealed participants:
- Remarked that some households experiencing job losses may not immediately face lower total income due to support from recently enacted fiscal programs
- Observed that household spending would likely be held down by a decrease in confidence and an increase in precautionary saving
- Noted recently enacted fiscal programs, like the paycheck protection program, were crucial in limiting the severity of the economic downturn and that additional support may be necessary if the economic downturn persists
- Were concerned that temporary layoffs could become permanent, and that workers who lose employment could exit the labor force
- Discussed alternative scenarios, differing in the assumed length of the pandemic and consequent economic disruptions, with regard to the behavior of economic activity in the medium term that all seemed about equally likely.
The FOMC is expected to meet next June 9-10; its tentative meeting schedule for 2020 can be viewed here.