Fed warns resurgence of virus threatens economic recovery

The Federal Reserve has warned that the fate of the world’s largest economy would “depend significantly on the course of the virus” as the US central bank extended measures to deal with the risk of an international shortage of dollars.

After a two-day meeting on Wednesday, the Federal Open Market Committee made no significant changes to monetary policy, holding interest rates close to zero and pledging to do more to support the recovery if necessary.

Jay Powell, the Fed chair, expressed fears that increases in Covid-19 infections across many US states had started to hit the economy, citing “non-standard, high-frequency data” on credit card spending, employment, hotel occupancy, restaurant bookings and consumer surveys.

“The pace of the recovery looks like it has slowed since the cases began that spike in June,” Mr Powell said at a press conference following the meeting. “It’s too early to tell both how large that is and how sustained it will be. We just don’t know yet,” he added.

In an indication of concerns that the pandemic could stir fresh trouble in international financial markets in future, such as the dollar shortages that occurred early in the pandemic, the Fed said it would extend emergency swap lines with some central banks until the end of the…

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