FOMC Minutes: Extra fiscal stimulus is crucial – UOB

Senior Economist at UOB Group Alvin Liew assessed the latest release of the FOMC minutes of the September meeting.

Key Quotes

“The FOMC minutes highlighted the importance of US fiscal stimulus in supporting the US economic recovery and urged the US lawmakers for more fiscal stimulus to support the continued recovery. It warned that the Fed’s [economic] outlook assumed additional fiscal support and that if future fiscal support was significantly smaller or came significantly later than they expected, the pace of recovery could be slower than anticipated. The message of more fiscal stimulus to support the US recovery has been repeated by many senior Fed officials, including FOMC Chair Powell, in recent weeks.”

“The Fed is currently satisfied with the new strategy of Average Inflation Targeting (AIT) and ‘there did not appear to be a need for enhanced forward guidance at this juncture or much scope for forward guidance to put additional downward pressure on yields’.”

“Going forward, as Powell has said that the guidance given in the September FOMC is ‘durable’, the Fed will likely maintain this accommodative monetary policy and economic outlook for now while we believe the Fed policy will continue its call for more fiscal stimulus. Beyond that, it will likely stay out of the limelight ahead of the 3 November US Presidential elections.”