JAKARTA (TheInsiderStories) – United States (US) Federal Reserve (Fed) chair Jerome Powell and treasury secretary Steven Mnuchin, reported as much as US$380 billion from the Congress’ last big coronavirus aid package is unused. That is far short of the $1 trillion new fiscal stimulus for the flagging recovery.
The rising tensions between Republicans and Democrats have made a new relief package look increasingly unlikely. The unused money, authorized by Congress in March as part of a $2.3 trillion, could go a long way to tide.
Mnuchin said, the treasury office still has $200 billion in unused funds earmarked to backstop emergency programs launched by the US central bank after the COVID-19 outbreak. Separately, some $130 billion is left in the now-expired Paycheck Protection Program that could go to help small businesses, he adds.
While, Powell said, most of the $75 billion allocated to backstop the Fed’ Main Street Lending Program remains unused. The program, which has so far lent about $2 billion to medium-sized companies, could extend as much as $30 billion in loans by year’ end.
At the same day, US President, Donald Trump, has signed two executive orders on healthcare plan for Americans, as he seeks to boost his flagging credibility with voters on the hot-button issue ahead of the Nov. 3 presidential election. Trump signed the twin orders in an airport hangar in Charlotte, North Carolina, on Thursday (09/24).
His administration also finalized a rule that will allow the import lower-cost of prescription drugs from Canada. He also proposed a rule to allow low-income Americans to purchase affordable insulin and Epi-Pens at nearly 10,000 clinic locations.
In his speech at the Capitol Hill, Powell explained, the historic collapse in the US economy in March and April will take time to reverse. However, the economy has rebounded more strongly than almost any forecaster expected. The median of projections for 2020 by the governors in September showed that both gross domestic product (GDP) and inflation had been revised up significantly from the median in the June projections.
“I expect that robust GDP growth over the rest of this year and in 2021 will lead to strong employment gains and move inflation closer to 2 percent. I would still caution that there is an unusually large amount of uncertainty now about any outlook, and I see the risks to the outlook as weighted to the downside,” said the chairman.
In the near term, with both employment and inflation significantly short of the Federal Open Meeting Committee (FOMC)’ economic goals, the prescription is for a sustained aggressive use of monetary policy to support the economy. In March, the board has cut the federal funds rate effectively to zero and began purchasing large quantities of treasury and agency mortgage-backed securities.
“Over the following weeks, the Fed used our emergency authority to establish 13 lending facilities to provide support to households, financial firms, nonfinancial businesses, nonprofit organizations, and municipal governments. We also took steps, including extending dollar swap lines to other central banks, to address strains in global dollar funding markets,” said Powell.
In conclusion, he conveyed, the COVID-19 was an enormous economic shock in the first half of 2020, but a recovery is underway, and the world seems to be adjusting in ways that allow us to address public concerns about the virus without sudden stops in economic activity. A full recovery is still a good way off, however, and risks remain weighted to the downside and the policymakers will need to remain vigilant.
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