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Fed Minutes Show Concerns About Severity of Downturn

Associated Press

   WASHINGTON - Federal Reserve officials last month expressed concerns
   about the severity of the economic downturn triggered by the
   coronavirus pandemic, saying the drop in economic activity in the
   spring would likely be the steepest in the post-World War II period.

   The minutes of the June 9-10 discussions, which were made public
   Wednesday, show officials grappling with economic disruptions that had
   already occurred and noting the crisis was "not falling equally on all
   Americans."

   The minutes say that Fed officials discussed how the sharp rise in
   joblessness had been especially severe for lower-wage workers, women,
   African Americans, and Hispanics.

   The Fed's policy-making committee voted 10-0 at the June meeting to
   keep central bank's benchmark interest rate at a record low near zero
   and officials expected that it would remain at that ultra-low level
   through 2022.

   In an interview Wednesday with Fox Business Network, President Donald
   Trump, who was highly critical of Fed Chairman Jerome Powell for much
   of last year, said Powell has done a good job in dealing with the
   coronavirus.

   "I would say I was not happy with him at the beginning, and I'm getting
   more and more happy with him. I think he stepped up to the plate. He's
   done a good job," Trump said. "I would say that, over the last period
   of six months, he's really stepped up to the plate."

   Trump, however, declined to say whether he would nominate Powell for a
   second term as Fed chairman if he wins re-election. Powell's current
   four-year term is up in 2022.

   The minutes of the June discussions show that officials had received a
   briefing from the Fed staff on possible ways to enhance the Fed's
   commitment to keeping rates low for an extended period. Those included
   the use of forward guidance in the policy statement and purchases of
   long-term bonds, both items the central bank is currently employing.

   The Fed staff also briefed on a tool that the central bank has not used
   in seven decades: establishing caps on interest rates at certain
   maturity levels.

   Under interest-rate caps, the Fed would purchase securities, such as
   three-year notes, to keep interest rates from rising above a certain
   limit. The central banks of Japan and Australia are currently employing
   that strategy.