FED OFFICIALS WANT MORE STIMULUS

Fed officials want more stimulus. Federal Reserve officials don’t like to wade into political debates, which is why it can be a distress signal when they do. Usually, the markets react negatively when they do, and stocks go down. In normal times, central bankers generally avoid making specific recommendations on hot button spending, tax and other policy matters handled by elected officials, because they want to preserve their autonomy to manage monetary policy with minimal interference. Chairman Jerome Powell has delicately but resolutely said in recent months he expects Congress will need to do more to compensate for income losses sustained by unemployed workers and revenue holes facing hard hit businesses and city and state governments because of the coronavirus pandemic. Fed officials want more stimulus.

Some colleagues have been more outspoken. “Trouble is brewing with the expiration of these relief policies,” Chicago Fed President Charles Evans told reporters in early August after temporary federal unemployment benefits lapsed. A month later, after little congressional progress on a new financial assistance package, Mr. Evans cited partisan politics as a threat to the economy. “A lack of action or an inadequate one presents a very significant downside risk to the economy today,” he said.

The economy has rebounded this summer, but some easy gains were expected. The ranks of temporarily laid off workers have fallen by two-theirs, or around 12 million, since the spring. Officials are uneasy because more than two million Americans have permanently lost their jobs, and these numbers seem likely to increase as vulnerable businesses shut down. “We do think it will get harder from here,” said Mr. Powell in an interview with National Public Radio earlier this month. Two reasons exist for the pessimism. First, the limits of their tools that became apparent well before the pandemic induced downturn. The second stems from the fact of the unique nature of the current shock.