The Federal Reserve Bank of St. Louis leader James Bullard gave an update today. He said that the US central bank policy is in a good place right now following Covid challenges. Regarding the monetary policy, Bullard said “we don’t know what’s around the corner as far as the crisis goes, so all those things make me think that we’re in a good position for now.”
The interest rates are at very low levels which aren’t expected to change much and there is seemingly a significant pace of purchases. He didn’t show much concern towards more stimulus because of the larger first round of fiscal stimulus which is still helping the economy. He also thinks that there is more improvement still coming with the unemployment rate. He said unemployment, which is currently at 6.9%, “could fall to between 4.9% and 5.5% by year-end, depending on when workers are called back.” Unfortunately, Bullard didn’t give any insight into possible policies going forward, but he noted that central bank and government aid have been effective during this Covid economic shock.
I agree with him that policies and aid thus far have been effective. I am not sure that I agree with stimulus being unnecessary at this point because many people and many businesses are still facing serious hurt. Do you agree or disagree with Bullard’s statements? What possible economic events do you think are coming our way that could change our current economic position?
Derby, M. S. (2020, November 13). Fed's Bullard Says Economy Has Recovered Faster Than Expected. Retrieved November 13, 2020, from https://www.wsj.com/articles/feds-bullard-says-economy-has-recovered-faster-than-expected-11605274229
I think that a key aspect that we must look at would be the transfer of power on Inauguration Day. The country is already more divided than ever. I fear that if it isn't a peaceful transition, it could have adverse effects on the economy in the short run. Doubts in the mind of investors would grow, and consumer confidence would fall, given the unrest. A peaceful transfer of power could help the economy.
ReplyDeleteI agree with Ali that the election alone has caused so many ups and downs in the economy because of expectations, I can only imagine what is going to happen in January. The uncertainty is what is so troubling right now, and I feel that it depends on consumers now to make the decisions. Stimulus, as we have learned, can really only help right now. The question is whether it is sustainable in the long run.
ReplyDeleteThe stimulus would be delayed until after Inauguration Day, so I think we will have a better idea of how needed the stimulus really is once we do have that transfer of power. If the recovery trends continue, I actually agree with Bullard that we likely do not need another stimulus. However, with COVID-19 cases hitting a new peak and cities starting to shut down, I highly doubt these trends continue. In that case, a stimulus would be much needed.
ReplyDeleteWhile it's all fine and good that unemployment is falling, cases and hospitalizations are also rising. It would probably be more prudent to provide another stimulus bill until there is a viable vaccine. This would minimize both the negative health and economic consequences of the pandemic.
ReplyDeleteWhile I do agree that a peaceful transfer of power may help with consumer/business confidence, I think some people are forgetting that there is a possibility of another lockdown. It may be next week or after the Inauguration. But while the economy may be recovering, the cases for Covid are not. Rather they are spiking and if the pandemic is not under more control, another lockdown similar to some European countries is highly likely. Because of that, any recovery to the economy that occurred now may be wiped out with another lockdown.
ReplyDeleteI would also disagree with the stimulus not being necessary. Many people live paycheck to paycheck so when they are not able to work, their lives are harshly impacted. Receiving a stimulus check is very important to most people because nobody expects to not be able to go into work.
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