— This is the script of CNBC's news report for China's CCTV on September 17, 2020, Thursday.
The Fed statement and Powell's remarks were broadly in line with market expectations in a recent CNBC survey. We don't see a lot of volatility in the financial markets. The Fed's emphasis on an average inflation target is actually setting higher conditions for rate increases, that is a dovish signal.
U.S. stocks, as well as inflation-fighting assets like gold, will continue to benefit from the Fed's easing. At the same time, we also noted that the Federal Reserve raised its forecast for U.S. economic growth this year and lowered its forecast for unemployment. But how to achieve this prospect? Beyond the Fed's monetary policy, there is a very important middle ground missing: the fiscal policy that Powell called for in his speech, or, more specifically, a new round of stimulus. The Federal Reserve has been printing money, but monetary policy alone makes it hard to get money to the people who really need it. It has also led to a certain disconnect between Wall Street, which represents the financial markets, and so-called Main Street, which reflects the vitality of small businesses and the performance of the real economy. We've seen a boom in the U.S. stock market recently, with IPO and SPAC all hot, but small businesses continue to struggle. The latest report released by the US review site Yelp shows that as of the end of August this year, a total of nearly 164,000 stores were closed due to the epidemic, an increase of 23% in mid-July earlier, and 60% of them were permanently closed. U.S. core retail sales also fell 0.1% in August, a sign that the economy needs more stimulus to sustain growth as the afterglow of previous rounds of stimulus wears off.
FMR FED RESERVE BOARD GOV.
People think that central banks can do everything，they can 't. They can affect asset prices. But then the question is, do this the second asset price? Is it enough to actually get the economy moving the way you want it to get moving? We saw this happen during the financial crisis, the Fed did a lot of things that were very, very positive. But in fact, we had a very, very slow recovery. What the Fed can do that's really important is it can prevent the financial panic and financial crisis. But once you do that, that then you basically your power is limited. And you have to recognize that and do what's right. But recognize that you may need more you need may need help in other in other parts of government policy.
For now, both parties have expressed a desire to reach agreement as soon as possible. But many in the market believe it could happen until after the elections. While a CNBC survey shows that many asset managers expect the U.S. to have a so-called disputed election this year, with no one knowing who will win or lose for a week or even a month after the election, these are uncertainties.
Additionally, market also considered the positive sides of vaccine research, once it cannot be launched soon, then the situation may face big change. As for the bad sides that may happen in the future, Powell said the fed still have tools, while the former fed chairman doubts that.
former vice chairman of the Federal Reserve
I don't know what extra can be done through monetary policy. Obviously, interest rates are very close to zero. I think there's gonna be an issue as to whether the American public will rebel against negative interest rates. It's not logical, but it may happen. And we'd have to see what happens there. I don't think the other elements that Chairman Powell mentioned were gonna, would make a big difference, I think fiscal policy would make a big difference.
A notable detail is that 2 of the voting members voted against fed's decision. That reflects that the fed inside has some divisions under the uncertainties brought by pandemic. We will keep an eye on this issue.