Photo: Reuters
(Reuters) - The big slowdown in U.S. jobs growth last month and the surge in COVID-19 cases signal more hurt ahead for the world's largest economy, but those rising risks aren't likely to trigger a rush by the Federal Reserve to ramp up or shift its bond-buying when policymakers meet later this month.
While they may offer guideposts for how their bond-purchase plans may unfold in the months ahead as they continue rounding out a new operating framework laid out in August, their hesitance to do more now boils down to three factors:
- Financial markets broadly speaking aren't in trouble, or signaling skepticism about the Fed's commitment to keeping rates low for years to come.
- Households and businesses that are in trouble need grants, which the Fed can't provide, not lower borrowing costs, which is what the Fed already has delivered.
- And to top it off, Fed policymakers say, the rapid spread of the virus means now is not the time to ramp up stimulus.
Even with no change to its policy setting, the Fed is delivering a tremendous amount of stimulus to an economy battered by the coronavirus and still struggling to recover from a historic recession. A government report Friday showed U.S. employers added the fewest jobs in November since the labor market began its recovery in May.
The Fed slashed interest rates to zero in March, and has vowed to keep them there until the economy returns to full employment and inflation reaches 2% and looks set to rise moderately faster than that for some time.
Policymakers expect it to take several years to meet that trio of tests, during which time businesses and households will be able to count on borrowing cheaply, which in turn should boost hiring, investment and spending.
The Fed is also buying $120 billion in Treasuries and mortgage-backed securities each month, more than it did in response to the financial crisis.
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