- US stimulus talks have hit a roadblock after months of failed Congressional efforts to reach another stimulus agreement.
- Markets to pay more attention to the Federal Reserve’s asset-purchase plans.
For a quick recap, Democrats and Republicans have cited a fundamental dispute over what the federal government needs to do to lift an economy as well as the health-care system battered by the virus.
House Democrats last passed a $2.2 trillion package this month. Senate Republicans tried to approve a $500 billion bill, but Democrats have blocked it.
Drew Hammill, Nancy Pelosi’s spokesman commented today, tweeting that ”two weeks later, the White House still has not lived up to Secretary Mnuchin’s promise to accept Democrats’ language to crush the virus, and we still are waiting for meaningful responses in the areas the Speaker outlined.”
Meanwhile, Treasury Secretary Steven Mnuchin accused House Speaker Nancy Pelosi of miscasting the state of coronavirus stimulus talks.
However, Pelosi has signalled that she wants to restart talks, but a potential agreement will now have to wait until the election. Congress left Washington and won’t be back until after Tuesday’s election.
Covid-19 infections have spiked around the country and the threat of more restrictions looms with will hit the economy and Americans’ wallets.
“The President’s words that ‘after the election, we will get the best stimulus package you have ever seen’ only have meaning if he can get Mitch McConnell to take his hand off the pause button and get Senate Republican Chairmen moving toward an agreement with their House counterparts,” Pelosi said.
Mnuchin responded to Pelosi on Thursday afternoon saying the speaker “sent [the letter] to my office at midnight and simultaneously released it to the press, I can unfortunately only conclude that it was a political stunt.”
“Your ALL OR NONE approach is hurting hard-working Americans who need help NOW,” he concluded.
Market implications
The Democratic presidential nominee Joe Biden’s shrinking lead in betting markets has helped to lift the US dollar.
The greenback has made some 1.5% in gains this week as a forthcoming deal remains elusive ahead of what could be a contested US election.
Such a scenario would result in a delay of another round of much needed US fiscal stimulus and likely put some downward pressure on risk markets for the near term.
A close result could also yield a split Congress which too would prolong the stimulus stalemate.
This lowers the bar for immediate additional measures from the Federal Reserve.
The upside for stocks and risks for the US dollar will depend more on the central-banks asset purchases.
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