Reuters reported that St. Louis Federal Reserve President James Bullard said on Tuesday he expects the U.S. Congress to approve new economic programs by the end of the month to keep businesses and households afloat and avoid an approaching “fiscal cliff.”
The expiry this month of extended unemployment benefits and other programs raised the risk that spending power could be drained from the US economy even as coronavirus cases surge and millions or workers wait to be called back to the job.
But “there will be a bill and it will be substantial,” Bullard predicted.
Key comments
- Stock markets have been rightly optimistic given better than expected jobs performance, boom to tech from shift to mobile technology.
- Fed programs not causing financial stability problems.
- Expects another fiscal package to be agreed in late July.
- No need for forward guidance or other monetary policy measures at this point given low interest rate expectations.
Market implications
The underbelly of risk-off sentiment has been brewing this week.
More on that here:
- S&P 500 Index bull-trap set-off, drops into the bear’s lair as bank’s earnings get underway
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