WASHINGTON–Minutes released from the Federal Reserve’s March 15 board meeting show its members contemplating two economic scenarios for the remainder of 2020. In the first, the Fed envisions the economy beginning to recover from the coronavirus pandemic in the second half of this year. In the second, the Fed board shared concerns over a “more adverse scenario” in which an economic recovery would not be “materially under way until next year.”
Separately, the Fed announced it has temporarily lifted the asset growth cap it placed on Wells Fargo.
Coming out of its March meeting the Fed did announce a reduction in the Fed Funds rate to nearly zero, and since the meeting has also launched numerous other efforts to prop up markets and the economy, with its chairman, Jerome Powell, essentially stating it is prepared to provide “limitless” liquidity.
Noting at the time it made its decision that the coronavirus pandemic was directly affecting air travel, cruise lines, hotels, tourism services, sports and recreation, entertainment, hospitality, and restaurants, the Fed states in the minutes it is prepared to keep rates near zero for an extended time period.
““With regard to monetary policy beyond this meeting, these participants judged that it would be appropriate to maintain the target range for the federal funds rate at 0 to ¼ percent until policymakers were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals,” the minutes state.
FOMC members who voted for the rate reduction included all of its members with the exception of Loretta J. Mester, who indicated she supports the Fed actions taken but would have preferred to reduce the target range for the federal funds rate to .5% to .75%.
Cap on Wells Fargo Lifted
Meanwhile, citing the “extraordinary disruptions from the coronavirus,” the Federal Reserve Board announced it is temporarily and narrowly modifying the growth restrictions it has put in place on Wells Fargo so it can provide additional support to small businesses, including participating in the Paycheck Protection Program.
The Fed in 2018 had taken the highly unusual step of placing growth restrictions on the big bank as the result of numerous scandals, including the opening of millions of bogus customer accounts.
The Fed said the change will only allow the firm to make additional small business loans as part of the Paycheck Protection Program, or PPP, and the Federal Reserve's forthcoming Main Street Lending Program.
The board said it will also require benefits from the PPP and the Main Street Lending Program to be transferred to the U.S. Treasury or to non-profit organizations approved by the Federal Reserve that support small businesses. The change will be in place as long as the facilities are active.
“The change today provides additional support to small businesses hurt by the economic effects of the coronavirus by allowing activities from the PPP and the Main Street Lending Program to not count against the cap,” the Fed said.