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Fed Chief Speaks on the Economy: Live Business Updates Fed Chief Warns of Lasting Economic Damage: Live Updates
(32 minutes later)
Fed Chair Jerome H. Powell said the central bank is not considering lowering interest rates below zero, saying that negative rates are not necessary given the Fed’s other tools.
“For now it’s not something that we are considering,” Mr. Powell said during a question-and-answer session after giving a speech at the Peterson Institute for International Economics.
Mr. Powell said the Fed would instead rely on the same tools it employed during the last recession — forward guidance about the path of interest rates and asset purchases.
“We have evidence that it works and that’s what we will be using,” Mr. Powell said, adding that the evidence about whether negative rates are effective is “very mixed,” Jeanna Smialek reports.
The Fed has already slashed rates to near zero and indicated that it will not raise them anytime soon. But some vocal champions of negative rates have continued to call on the Fed to embrace them, including President Trump, who has repeatedly urged Mr. Powell to take rates below zero.
“As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT.” Big numbers!” Mr. Trump said in a tweet on Tuesday.
Federal Reserve Chair Jerome H. Powell said an even stronger fiscal policy response might be needed to restore economic prosperity as a downturn “without modern precedent” strikes the United States — one that brings with it the threat of long-lasting damage.Federal Reserve Chair Jerome H. Powell said an even stronger fiscal policy response might be needed to restore economic prosperity as a downturn “without modern precedent” strikes the United States — one that brings with it the threat of long-lasting damage.
“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Mr. Powell said, in a set of pointed prepared remarks set for delivery at a Peterson Institute for International Economics virtual event. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Mr. Powell said, in a set of pointed prepared remarks set for delivery at a Peterson Institute for International Economics virtual event. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
The Fed has rushed to support the U.S. economy as coronavirus fears sent markets sharply lower in late February and lockdowns took hold in March, leaving workers jobless and businesses without income. Mr. Powell and his colleagues slashed interest rates to zero, rolled out unlimited bond buying meant to restore order in government bond markets, and unveiled nine emergency lending programs in partnership with the Treasury Department.The Fed has rushed to support the U.S. economy as coronavirus fears sent markets sharply lower in late February and lockdowns took hold in March, leaving workers jobless and businesses without income. Mr. Powell and his colleagues slashed interest rates to zero, rolled out unlimited bond buying meant to restore order in government bond markets, and unveiled nine emergency lending programs in partnership with the Treasury Department.
But Mr. Powell reiterated on Wednesday that the Fed’s programs, which will buy bonds from companies and local governments and make loans to midsize businesses, can only temporarily supply credit to ruptured markets. The Fed does not have the ability to make grants, which may be what companies and households need to make it through.But Mr. Powell reiterated on Wednesday that the Fed’s programs, which will buy bonds from companies and local governments and make loans to midsize businesses, can only temporarily supply credit to ruptured markets. The Fed does not have the ability to make grants, which may be what companies and households need to make it through.
He characterized the Fed’s ability to help as a “bridge across temporary interruptions to liquidity.” But he highlighted that more than a bridge may be needed as huge uncertainties continue to confront the economy, from the speed of reopening to the scope of testing and timing of a vaccine.He characterized the Fed’s ability to help as a “bridge across temporary interruptions to liquidity.” But he highlighted that more than a bridge may be needed as huge uncertainties continue to confront the economy, from the speed of reopening to the scope of testing and timing of a vaccine.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” he said. “Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.”“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” he said. “Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.”
Coronavirus lockdowns have left more than 20 million people out of work, disproportionately hitting service sector workers, many of them low-income and without savings.Coronavirus lockdowns have left more than 20 million people out of work, disproportionately hitting service sector workers, many of them low-income and without savings.
“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Mr. Powell said Wednesday, noting that “the job gains of the past decade have been erased.”“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Mr. Powell said Wednesday, noting that “the job gains of the past decade have been erased.”
U.S. stock futures edged higher on Wednesday as investors awaited an address by the head of the Federal Reserve that could shed further light on the state of the economy. U.S. stocks fell on Wednesday after the Federal Reserve chair signaled a prolonged recession may be ahead without further fiscal support from lawmakers.
The Fed chair, Jerome H. Powell, will speak via webcast at 9 a.m. Eastern. He is expected to talk about the challenges facing the U.S. economy, and investors will be watching for any hints of further action from the central bank. The Fed chair, Jerome H. Powell, speaking via webcast, said the central bank’s efforts to stem the damage to the U.S. economy wouldn’t be enough to address a downturn “without modern precedent.” His comments came as Congress began to hash out the future of the government’s coronavirus response. House Democrats on Tuesday unveiled a $3 trillion relief measure, which Republicans dismissed as exorbitantly priced and overreaching.
Futures for the S&P 500 were up less than 1 percent, signaling a positive open to trading on Wall Street. Global markets were broadly down, with European indexes trading 1 to 2 percent lower after a mixed day in Asia. The S&P 500 dropped in early trading. Global markets were broadly lower, with European indexes down 1 to 2 percent.
It came after a downbeat day on Wall Street on Tuesday, with the S&P 500 dropping 2 percent after officials warned that fully reopening the country’s economy could be a long and protracted process. The gloomy news continued on Wednesday, as the British government reported its economy fell 2 percent in the first quarter, and 5.8 percent in March alone. Commerzbank, Germany’s second-largest lender, said it was anticipating a large number of customers would be unable to repay loans. Wednesday’s trading came after a downbeat day on Wall Street on Tuesday, with the S&P 500 dropping 2 percent after officials warned that fully reopening the country’s economy could be a long and protracted process. The gloomy news continued on Wednesday, as the British government reported its economy fell 2 percent in the first quarter, and 5.8 percent in March alone. Commerzbank, Germany’s second-largest lender, said it was anticipating a large number of customers would be unable to repay loans.
Oil prices fell after gains over the last several days.Oil prices fell after gains over the last several days.
The Internal Revenue Service on Tuesday made it easier for employers to allow workers to make adjustments to their health insurance plans and flexible spending accounts in response to the coronavirus pandemic.The Internal Revenue Service on Tuesday made it easier for employers to allow workers to make adjustments to their health insurance plans and flexible spending accounts in response to the coronavirus pandemic.
Normally, strict rules prevent employees from changing health insurance plans in the middle of a year. But the I.R.S. is giving employers a way to let workers make changes without waiting for the usual enrollment period.Normally, strict rules prevent employees from changing health insurance plans in the middle of a year. But the I.R.S. is giving employers a way to let workers make changes without waiting for the usual enrollment period.
Under the new guidance, employers can let their workers drop out of their health insurance if they have another option, or sign up if they failed to earlier in the year. Workers could also be allowed to add more family members to their plan, or switch from one workplace plan to another.Under the new guidance, employers can let their workers drop out of their health insurance if they have another option, or sign up if they failed to earlier in the year. Workers could also be allowed to add more family members to their plan, or switch from one workplace plan to another.
Britain’s economy contracted by 2 percent in the first three months of 2020 compared to the previous quarter, the government reported on Wednesday, the steepest quarterly drop since the financial crisis in 2008. In March alone, the economy shrank by 5.8 percent from February, the largest drop since the Office of National Statistics began keeping monthly tallies in 1997.Britain’s economy contracted by 2 percent in the first three months of 2020 compared to the previous quarter, the government reported on Wednesday, the steepest quarterly drop since the financial crisis in 2008. In March alone, the economy shrank by 5.8 percent from February, the largest drop since the Office of National Statistics began keeping monthly tallies in 1997.
The January-March period did not reflect the full effects of the coronavirus pandemic that has led to government-ordered lockdowns in Britain and elsewhere. Britain’s lockdown only began in the last week in March. Since then, schools and many shops have been closed, and many employees have either been furloughed from their jobs — a government scheme pays up to 80 percent of furloughed employees’ wages — or are working at home.The January-March period did not reflect the full effects of the coronavirus pandemic that has led to government-ordered lockdowns in Britain and elsewhere. Britain’s lockdown only began in the last week in March. Since then, schools and many shops have been closed, and many employees have either been furloughed from their jobs — a government scheme pays up to 80 percent of furloughed employees’ wages — or are working at home.
The agency said that in March nearly every part of the economy was hit, with education, car sales and restaurants all falling substantially. Among the few industries that recorded growth were IT support and pharmaceuticals and cleaning products as the country stocked up to prepare for the pandemic.The agency said that in March nearly every part of the economy was hit, with education, car sales and restaurants all falling substantially. Among the few industries that recorded growth were IT support and pharmaceuticals and cleaning products as the country stocked up to prepare for the pandemic.
Last week, the Bank of England published a scenario forecasting that the gross domestic product could fall by 14 percent in 2020, which would be the steepest annual drop in economic activity since 1706.Last week, the Bank of England published a scenario forecasting that the gross domestic product could fall by 14 percent in 2020, which would be the steepest annual drop in economic activity since 1706.
Tesla’s California car factory received a conditional approval from local officials late Tuesday to begin getting ready to restart production next week.Tesla’s California car factory received a conditional approval from local officials late Tuesday to begin getting ready to restart production next week.
The Alameda County Public Health Department said that it had held “productive discussions” with Tesla’s representatives, and that it made “additional safety recommendations” to the carmaker’s plans.The Alameda County Public Health Department said that it had held “productive discussions” with Tesla’s representatives, and that it made “additional safety recommendations” to the carmaker’s plans.
“If Tesla’s Prevention and Control Plan includes these updates, and the public health indicators remain stable or improve, we have agreed that Tesla can begin” to prepare the factory this week for “possible reopening as soon as next week,” the health department said.“If Tesla’s Prevention and Control Plan includes these updates, and the public health indicators remain stable or improve, we have agreed that Tesla can begin” to prepare the factory this week for “possible reopening as soon as next week,” the health department said.
The announcement came after a day when Tesla was shipping out new cars from the site despite the county’s order prohibiting it from restarting production.The announcement came after a day when Tesla was shipping out new cars from the site despite the county’s order prohibiting it from restarting production.
The company’s chief executive, Elon Musk, said on Monday that the factory would restart in violation of an order from Alameda County, and dared officials to arrest him. President Trump threw his weight behind the billionaire entrepreneur on Tuesday, saying California should allow Tesla to restart “NOW.”The company’s chief executive, Elon Musk, said on Monday that the factory would restart in violation of an order from Alameda County, and dared officials to arrest him. President Trump threw his weight behind the billionaire entrepreneur on Tuesday, saying California should allow Tesla to restart “NOW.”
It was not clear how many cars Tesla was making. But on Tuesday, trucks were leaving the factory, which is the Bay Area city of Fremont, with new sedans and sport-utility vehicles. New cars were also parked in rows outside the factory. The parking lot for employees was also filled.It was not clear how many cars Tesla was making. But on Tuesday, trucks were leaving the factory, which is the Bay Area city of Fremont, with new sedans and sport-utility vehicles. New cars were also parked in rows outside the factory. The parking lot for employees was also filled.
Tesla’s head of human resources for North America, Valerie Workman, sent an email to employees on Monday saying that their furloughs had ended on Sunday. She said employees who were uncomfortable returning to work could stay home on unpaid leave.Tesla’s head of human resources for North America, Valerie Workman, sent an email to employees on Monday saying that their furloughs had ended on Sunday. She said employees who were uncomfortable returning to work could stay home on unpaid leave.
Tesla did not respond to a request for comment.Tesla did not respond to a request for comment.
The county’s director for health care services, Colleen Chawla, had sent a letter to Tesla late Monday saying that the company was violating its order. “We hope that Tesla — like other businesses who have been notified of noncompliance — comes into compliance with the order without the need for additional enforcement measures,” Ms. Chawla said.The county’s director for health care services, Colleen Chawla, had sent a letter to Tesla late Monday saying that the company was violating its order. “We hope that Tesla — like other businesses who have been notified of noncompliance — comes into compliance with the order without the need for additional enforcement measures,” Ms. Chawla said.
The plant is Tesla’s main source of revenue and has been closed for more than a month. County officials have said they were working with Tesla on an agreement to reopen the plant on May 18. But Tesla sued the county on Saturday in United States District Court in San Francisco, arguing that the county’s order was unconstitutional and contradicted an order by Gov. Gavin Newsom that permits manufacturing statewide.The plant is Tesla’s main source of revenue and has been closed for more than a month. County officials have said they were working with Tesla on an agreement to reopen the plant on May 18. But Tesla sued the county on Saturday in United States District Court in San Francisco, arguing that the county’s order was unconstitutional and contradicted an order by Gov. Gavin Newsom that permits manufacturing statewide.
Some automakers may emerge stronger, others too weak to survive on their own. Factories will shut down. The pressure to go electric could become more intense.Some automakers may emerge stronger, others too weak to survive on their own. Factories will shut down. The pressure to go electric could become more intense.
The outbreak will realign the business of making cars in ways that could have a profound effect on the eight million people worldwide who work for vehicle manufacturers. As Volkswagen, Daimler, Fiat Chrysler and other companies slowly restart their assembly lines, people who work in the car business are beginning to ponder what the repercussions of this crisis will be.The outbreak will realign the business of making cars in ways that could have a profound effect on the eight million people worldwide who work for vehicle manufacturers. As Volkswagen, Daimler, Fiat Chrysler and other companies slowly restart their assembly lines, people who work in the car business are beginning to ponder what the repercussions of this crisis will be.
People may travel less now that they have discovered how much they can get done from home. Or they may commute more by car to avoid jostling with others on crowded buses and trains. Companies like Chinese automakers could swoop in on competitors elsewhere with battered share prices. Labor strife could become more common as factories close. All the chaos may leave room for start-ups that could inject new life in the industry.People may travel less now that they have discovered how much they can get done from home. Or they may commute more by car to avoid jostling with others on crowded buses and trains. Companies like Chinese automakers could swoop in on competitors elsewhere with battered share prices. Labor strife could become more common as factories close. All the chaos may leave room for start-ups that could inject new life in the industry.
“We shouldn’t be too optimistic and expect that in 2021 everything is going to go back to normal as if nothing happened,” Ola Källenius, the chief executive of Daimler, told reporters during a recent conference call. The pandemic, he said, “will probably have a huge effect on the economy and we have to prepare.”“We shouldn’t be too optimistic and expect that in 2021 everything is going to go back to normal as if nothing happened,” Ola Källenius, the chief executive of Daimler, told reporters during a recent conference call. The pandemic, he said, “will probably have a huge effect on the economy and we have to prepare.”
We’ve never been such attractive targets for fraudsters and scammers, writes Brian X. Chen. Uncertainty around the coronavirus pandemic has created opportunities for robocallers, hackers and other thieves.We’ve never been such attractive targets for fraudsters and scammers, writes Brian X. Chen. Uncertainty around the coronavirus pandemic has created opportunities for robocallers, hackers and other thieves.
Millions of people are filing claims for unemployment benefits and awaiting stimulus checks. So when a phone call or an email from someone purporting to be a bank or a government official comes in, it is tougher to ignore.Millions of people are filing claims for unemployment benefits and awaiting stimulus checks. So when a phone call or an email from someone purporting to be a bank or a government official comes in, it is tougher to ignore.
Here’s what not to fall for:Here’s what not to fall for:
FAKE WEBSITES Fraudsters are trying to capitalize on our behavior by creating fake websites. To protect yourself, check the website’s URL and install an ad blocker.FAKE WEBSITES Fraudsters are trying to capitalize on our behavior by creating fake websites. To protect yourself, check the website’s URL and install an ad blocker.
SCAM CALLS Robocallers have a reputation for sounding dumb, but they are resourceful and work hard for your money. If you think a scammer is calling, hang up and call back. To avoid falling for a spoofed number, remove businesses from your phone’s address book.SCAM CALLS Robocallers have a reputation for sounding dumb, but they are resourceful and work hard for your money. If you think a scammer is calling, hang up and call back. To avoid falling for a spoofed number, remove businesses from your phone’s address book.
EMAIL AND TEXT MESSAGES Phishing is one of the oldest internet scams, but it still happens because it works. Check the sender. Fraudulent email addresses will look like legitimate ones but often be off by a character or two. And check — but don’t click on — hyperlinks.EMAIL AND TEXT MESSAGES Phishing is one of the oldest internet scams, but it still happens because it works. Check the sender. Fraudulent email addresses will look like legitimate ones but often be off by a character or two. And check — but don’t click on — hyperlinks.
THE HOME OFFICE Hackers trying to steal information from a business might look to attack our personal email accounts or home networks. Check your network security and update your Wi-Fi router. And keep work and business tech separate, because your equipment and apps were probably not set up to protect your company’s network security.THE HOME OFFICE Hackers trying to steal information from a business might look to attack our personal email accounts or home networks. Check your network security and update your Wi-Fi router. And keep work and business tech separate, because your equipment and apps were probably not set up to protect your company’s network security.
Shortages of safety gear and staff. Workers who may inadvertently be carriers. A disease that preys on older people with underlying health conditions. There are many reasons the coronavirus has hit nursing homes so hard.
Add the design of the buildings to the list.
With shared resident rooms off long corridors and vast dining rooms where everyone mingles, nursing homes may have been laid out to be efficient and cost effective. But these very features have also allowed the virus to spread from person to person in what Gov. Andrew M. Cuomo of New York called “a feeding frenzy.”
New York State has become a pandemic hot spot. “Why are we seeing such a high rate in nursing homes?” asked Richard J. Mollot, executive director of the Long Term Care Community Coalition, an advocacy group for residents. “Maybe it’s because some nursing homes are so big.”
Before the pandemic, a movement under the banner of “culture change” was challenging the institutional model, calling for dividing up large nursing home populations into small, self-sufficient units with kitchens, private rooms and a dedicated staff. Now, anecdotal reports suggest that private rooms may be having more success at keeping the coronavirus at bay.
Commerzbank, Germany’s second-largest lender after Deutsche Bank, fell into the red during the first three months of 2020 as it faced an increase in problem loans caused by the pandemic. The bank reported a loss of 295 million euros, or $320 million, in the quarter, compared with a profit of €122 million a year earlier. While revenue from interest and commissions rose because of higher demand for loans, Commerzbank quadrupled the amount it set aside to cover losses from delinquent borrowers.Commerzbank, Germany’s second-largest lender after Deutsche Bank, fell into the red during the first three months of 2020 as it faced an increase in problem loans caused by the pandemic. The bank reported a loss of 295 million euros, or $320 million, in the quarter, compared with a profit of €122 million a year earlier. While revenue from interest and commissions rose because of higher demand for loans, Commerzbank quadrupled the amount it set aside to cover losses from delinquent borrowers.
TUI, the world’s largest travel company, said it would cut its work force by more than 10 percent after the pandemic brought its operations almost to a standstill. The company, based in Hanover, Germany, said it would begin reopening some of its 400 hotels and resorts in coming days, but that it would still need to cut 8,000 jobs out of a total of 70,000 worldwide. TUI also owns a fleet of 150 aircraft and 18 cruise ships.TUI, the world’s largest travel company, said it would cut its work force by more than 10 percent after the pandemic brought its operations almost to a standstill. The company, based in Hanover, Germany, said it would begin reopening some of its 400 hotels and resorts in coming days, but that it would still need to cut 8,000 jobs out of a total of 70,000 worldwide. TUI also owns a fleet of 150 aircraft and 18 cruise ships.
Reporting was contributed by Jeanna Smialek, Stanley Reed, Jack Ewing, Carlos Tejada, Mohammed Hadi, Vikas Bajaj, Niraj Chokshi, Neal E. Boudette, Jane Margolies and Gregory Schmidt.Reporting was contributed by Jeanna Smialek, Stanley Reed, Jack Ewing, Carlos Tejada, Mohammed Hadi, Vikas Bajaj, Niraj Chokshi, Neal E. Boudette, Jane Margolies and Gregory Schmidt.