Fed advances policy review on ‘very elevated’ uncertainty

Federal Reserve officials have moved closer to a consensus on how to take further action to help the economy weather the protracted coronavirus crisis, amid growing worries within the central bank about risks to the outlook.

According to minutes from the Fed’s monetary policymaking committee meeting in late July, officials stressed that uncertainty over the path of the economy was “very elevated” due to the impact of new waves of virus outbreaks and the waning fiscal support for households and businesses.

Against that backdrop, “several” officials at the central bank suggested that “additional accommodation would be required to promote economic recovery and return inflation to the committee’s 2 per cent objective”, and some stressed that “strong fiscal policy support would be necessary to encourage expeditious improvements in labour market conditions”.

The Fed has been debating whether to take further steps on top of a number of emergency measures it adopted early in the crisis, which included slashing interest rates to zero, sharply expanding its balance sheet through open-ended government debt purchases and establishing a series of emergency lending facilities to prop up markets.

The main option under discussion would be to strengthen the Fed’s guidance on…

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