- CARES Act (pandemic relief) requires a quarterly Congressional update.
- Chairman Powell and Treasury Secretary Steven Mnuchin to appear before the Senate Banking Committee.
- Both officials expected to offer complementary views of rescue programs.
- Previous Federal Reserve and Washington support have boosted US dollar.
Together the Federal Reserve and Washington have poured more than six trillion dollars into the US economy in spending, grants, loans, rate cuts and bond purchases in an effort to blunt the impact of the pandemic induced closure of large parts of the US economy.
Even though the White House and the Fed have taken slightly different paths in the last few weeks with the Mr. Powell advocating more fiscal spending and Secretary Mnuchin suggesting an assessment period for the current stimulus before providing more, the two are likely to stress the complementary nature of the government measures.
Mr. Powell said that the recovery ‘could stretch through the end of next year” in an interview on CBS that aired on Sunday but had been recorded on May 13. “Assuming that there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year.” “I do think that people will be careful about resuming their typical spending behavior. So certain parts of the economy will recover much more slowly.”
The Fed chairman has repeatedly said that the central bank is not considering negative rates as it “doesn’t see much benefit to them.”
The White House has said that it wants any future relief bill to include a payroll tax cut while the House Democrats have proposed an additional $3 trillion in various programs but oppose general tax relief.
Germany and France agreed on a €500 billion recovery fund that would provide grants not loans to member states especially for countries that have been hardest hit by the virus, meaning, without specific mention, Italy, among others. The euro rose more than a figure closing at 1.0915 in Monday trading on the news.
The US dollar’s risk premium faded somewhat as equities rallied strongly around world on the notice that a coronavirus vaccine from Moderna, a genetech firm, was successful in an initial limited test and would move on to a large trial.
The Dow rose 3.85%, 911.95 points to close at 24,597.37 and the S&P 500 jumped 3.15%, 90,21 points to 2,953.91. The yield on the 10-year Treasury gained seven points to 0.714% and the 2-year added three points to 0.183%.
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