Fed signals readiness to do more for economy as virus rages

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Federal Reserve Board Chairman Jerome Powell testifies during a Senate Banking Committee hearing, Thursday Sept. 24, 2020 on Capitol Hill in Washington about the CARES Act and the economic effects of the coronavirus pandemic. (Drew Angerer/Pool via AP)

WASHINGTON – 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.