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Fed signals readiness to do more for economy as virus rages

FILE - In this March 3, 2020 file photo, Federal Reserve Chair Jerome Powell speaks during a news conference to discuss an announcement from the Federal Open Market Committee, in Washington. Federal Reserve officials are grappling this week with the timing and scope of their next policy moves at a time when the raging viral pandemic has weakened the U.S. economy. No major changes are likely when the Fed releases a statement Wednesday, July 29, after its two-day policy meeting ends and just before Powell holds a news conference. (AP Photo/Jacquelyn Martin, File)

WASHINGTON (AP) — The Federal Reserve kept its benchmark interest rate at a record low near zero Thursday and signaled its readiness to do more if needed to support an economy under threat from a worsening coronavirus pandemic.

The Fed announced no new actions after its latest policy meeting but left the door open to provide further assistance in the coming months. The central bank again pledged to use its “full range of tools to support the U.S. economy in this challenging time.” The economy in recent weeks has weakened after mounting a tentative recovery from the deep pandemic recession in early spring.

“I think we have to be humble about where we are,” Chair Jerome Powell said at a news conference when asked whether the economy was at risk of enduring a severe setback with confirmed viral cases in the United States setting record highs. “We are very far from saying that we’ve got this and eliminated” the risks.

Several Fed officials have expressed
concern that Congress has failed so far to provide further aid for
struggling individuals and businesses. The Fed’s policy statement,
issued after a two-day meeting, made no mention of lawmakers’ failure to
act. But when asked about the danger to the economy without a new
rescue aid package soon, the chairman was clear:

“I think we will have a stronger recovery if we can get more fiscal support” from Congress, Powell said.

A
multi-trillion-dollar stimulus, enacted in the spring, had helped
sustain jobless Americans and ailing businesses but has since expired.
The failure of lawmakers to agree on any new aid has clouded the future
for the unemployed, for small businesses and for the economy as a whole.
There is some hope, though, that a logjam can be broken and more
economic relief can be enacted during a post-election “lame-duck”
session of Congress between now and early January.

“The outlook for the economy is extraordinarily uncertain,” Powell said at the news conference.

The
chairman said the policymakers discussed this week whether and how
their bond buying program might be altered to provide more economic
support. The Fed is buying $120 billion a month in bonds — $80 billion
in Treasurys and $40 billion in mortgage bonds — to try to keep
long-term borrowing costs low. Powell’s comments appeared to raise the
possibility that changes could be announced as soon as the Fed’s next
meeting in December.

In addition to buying bonds to keep long-term
borrowing costs low, the Fed has kept its key short-term rate, which
influences many corporate and individual loans, near zero.

The
Fed’s latest policy meeting coincided with an anxiety-ridden election
week and an escalation of the virus across the country. Most economists
warn that the economy cannot make a sustained recovery until the
pandemic is brought under control and most Americans are confident
enough to return to their normal habits of shopping, traveling, dining
and congregating in groups.

“The recent rise in COVID-19 cases
both here and abroad is particularly concerning,” Powell said. “All of
us have a role to play, to keep appropriate social distance and to wear
masks in public.”

The central bank’s policy statement Thursday was
approved on a 10-0 vote. Robert Kaplan, president of the Federal
Reserve Bank of Dallas, who had dissented at the previous meeting, voted
with the majority this time. Another dissenter in September, Neel
Kashkari, head of the Minneapolis Fed, was absent, with his alternate,
Mary Daly of the San Francisco Fed, approving the statement.

The
statement was nearly identical to the one the Fed issued in September.
At that meeting, it adopted a policy goal change it had made in August
to keep rates low for some period of time even after inflation hits its
2% annual target. The reason was to allow the Fed to supply a longer
boost to the economy and for unemployment to fall further before the
policymakers begin to worry about inflation.

At his news
conference, Powell was asked about a nationwide shortage of coins that
has developed as a decline of shoppers at retail stores has depressed
the normal circulation of change. He noted that the circulation of coins
and currency was especially important for low-income people who do not
have credit cards.

The chairman said he had been told by Fed
officials who are reviewing the problem that “things have gotten
significantly better” and that the situation was “well on the way to
normalizing.”