In the minutes of its last meeting, the Fed expressed concern that “some business models may no longer be economically viable.
The health crisis could definitively destroy certain sectors of activity if they remained shunned by customers, despite the relaxation of containment measures, according to minutes from the last meeting of the Federal Reserve (Fed) monetary committee, published Wednesday .
The Fed expressed concern that “some business models may no longer be economically viable, for example if consumers continue to avoid participating in certain economic activities,” according to the minutes of the April 28-29 meeting.
Monetary committee members also fear that many small businesses may not be able to withstand the lasting effects on their finances of this shock, despite the aid provided by the American stimulus plan to enable them to continue to pay wages.
They noted that certain sectors had been particularly affected, citing air transport, cruises, catering, and tourism.
The energy sector could also experience “a wave of bankruptcies” if prices remain low.
The containment measures put in place since March in the United States have knocked down the economy, which was one of Donald Trump’s main campaign arguments for his re-election to the White House.
The President is anxious to see the economy recover. But the debate is raging between supporters of a rapid reopening and those who warn of the dangers of a second wave of contamination.
The pandemic poses many medium and long-term risks to the economy, members of the Fed’s monetary committee also noted.
They fear that workers who lose their jobs will not “lose their skills”, but also “access to childcare or elderly care”, or be “discouraged” and no longer seek employment.
“Some temporary layoffs could become permanent,” they fear.
At the end of its meeting, the Fed had kept the key rates in the range of 0 to 0.25%, a level at which it will leave them until it is convinced that the economy has “survived” at the health crisis.
The Central Bank also promised to do everything it could to save the US economy, which should “fall at an unprecedented rate in the second quarter,” after falling 4.8% in the first quarter.
Fed chairman Jerome Powell spoke of a 20-30% drop in GDP on Sunday and a likely spike in the unemployment rate to 20-25%.