Fed in holding pattern amid tense US election

Washington – The Federal Reserve’s policy setting committee meets this week at a turbulent time: one day after voters head to the polls in the deeply uncertain US presidential election.

But the body pointedly keeps itself out of politics, and analysts expect the policy-setting Federal Open Markets Committee (FOMC) will do little to rock the boat at its two-day meeting beginning Wednesday.

The Fed already zeroed out borrowing rates and offered massive credit facilities amid the coronavirus downturn, recently expanding them to reach more firms and nonprofit organizations.

“I think November’s meeting is too soon for there to be a dramatic break,” said David Wilcox, a former top economist at the Fed who is now with the Peterson Institute for International Economics.

“This is a sort of a placeholder meeting while they wait for those situations to clarify.”

Political uncertainty ahead of the vote comes amid continued worries about the world’s largest economy amid the coronavirus crisis.

While the Fed moved quickly with new credit lines and the rate cut as the pandemic arrived, the initial momentum to get aid bills through Congress has petered out despite increasingly desperate pleas for more aid from Fed Chair Jerome Powell.

John Mousseau, president and chief executive officer at Cumberland Advisors, said the central bank is likely to again encourage lawmakers to continue the push for new stimulus after the election in the final weeks before a new Congress is installed in January.

“The Fed has done their job,” he said.

And as they call for more aid next week “the message will be delivered to a lame duck Congress that might actually act on what the Fed’s doing.”

The FOMC meeting lacks any suspense over the benchmark lending rate after the central bank in August debuted a new policy keeping interest rates lower for longer to wait for inflation to rise and maximize employment.