Election chaos won't prevent the Fed from backstopping the U.S. economy.
“The market has been correlated to the Fed. The Fed’s going to
continue to ease whoever the president is,” said Robert Wolf, former UBS
Group Americas chair and a FOX Business Democratic contributor. “I
think the markets will do pretty well.”
Powell, whose terms ends
in February 2022, began the Fed’s two-day meeting on Wednesday. The
central bank will announce its interest rate decision Thursday.
are expecting policymakers to hold rates near record lows, according to
the CME Group’s FedWatch tool. Powell has reiterated in recent weeks
that policymakers are committed to helping steer the economy through the
fragile recovery while urging lawmakers to do their part.
bouts of volatility and pullbacks around the election, the S&P 500
and the Nasdaq Composite are about 4% off record highs while the Dow is
less than 5% from its own peak.
Policymakers have since the
outbreak of COVID-19 injected $2.3 trillion into the U.S. economy and
have shored up lending to Main Street, most recently by lowering the
borrowing minimum for small- and medium-sized businesses to $100,000
Like Wolf, many economists don’t see the Fed’s
free-money train slowing down anytime soon as the ripple effects of the
pandemic loom large.
“The Fed is unlikely to withdraw support
until the economy is much more fully recovered,” wrote Ethan Harris,
global economist at Bank of America Securities.
The ADP National
Employment report, released Wednesday, showed private employers added
365,000 jobs last month, below the 600,000-650,000 estimate.
Unemployment could remain elevated as another round of stimulus remains
in limbo amid the election uncertainty.
Friday’s jobs report for
November will provide a fresh update with the unemployment rate expected
to remain at 7.9%, according to economists.
Along with the Fed’s
decision, equally notable will be Powell’s press conference on
Thursday. He’ll share the central bank’s outlook for the U.S. economy,
and will almost certainly be asked about the outcome of the election.
Trump, for months, attacked Powell on Twitter and in interviews for
keeping interest rates too high. The president softened his tone after
Powell, in March, led a rescue of the U.S. economy, injecting trillions
in fiscal stimulus as COVID-19 raged.
“I would say that I was not
happy with him at the beginning and I am getting more and more happy
with him,” said Trump during an exclusive interview with FOX Business
last July. “I think he stepped up to the plate. He’s done a good job."