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Powell Laments "Weak Demand," America Still Waits on Congress

·3 min read

We were moderately mixed in the markets this Hump Day, with economic data largely showing a U.S. economy slowing its roll, and a Fed Chair more or less in agreement with this. After worse-than-expected Retail Sales and a big drop in PMI Services, likely due to the recent surge in Covid-19 cases shutting down restaurants and other service-related businesses, Fed Chair Jay Powell said the Federal Reserve will continue buying bonds until “substantial” progress is made in economic growth.

Even though the Fed has gone above and beyond what many observers expected in terms of business and lending accommodation — near-zero interest rates, but much more — Powell still said the Fed can do more, such as expand asset purchase programs, focused on the longer end. Powell said weak demand continues to hold down inflation, even as he increased his 2021 growth outlook by 20 basis points to 4.2%. But he also made sure to point out that near-term, it’s not just low interest rates that will help spur the economy. Cue Capitol Hill, and the $900 billion bill inching closer to passing both houses of government.

With no aid for state and local governments and a stimulus check for half the $1200 sent out this past spring, the new relief bill is the closest Congress has come to following up the CARES Act stimulus package, which expired in July. Extending Pandemic Unemployment Assistance (PUA), which was scheduled to expire the day after Christmas, and rent payment forgiveness, which was scheduled to expire after the first of the year, were widely seen as two “must-haves” in the new bill.

That said, it’s not yet passed, and the House had planned on adjourning for the holidays this Friday. This brings a ticking clock to the proceedings. Although much talk has been uttered about the need for further stimulus, until something actually gets passed, a large amount of the American public remains hanging by a thread at this hour.

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