The Federal Reserve is extending its lending programs through the end of the year.
As the coronavirus pandemic continues to grip the country, the United States central bank has announced a three-month extension to seven of its emergency facilities for individuals, businesses and both state and local governments. The programs — which the bank called a “critical backstop” for the economy — were scheduled to expire in September.
In a statement, the Fed’s board of governors said that the move would “facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover.”
The extension will apply to facilities for primary dealers and money markets, as well as corporate bond purchases, and the term asset-backed securities facility. It will also have bearing on the Main Street lending program aimed at boosting small and mid-size firms and the Paycheck Protection Program Liquidity Facility that incentivizes employers to retain operations and their workers’ jobs amid the outbreak. (The facility supports the government’s Paycheck Protection Program by extending credit to financial institutions that make or purchase PPP loans, using the loans as collateral.)
The Fed began rolling out the emergency programs in March, when the COVID-19 health crisis took hold in the U.S. and led to widespread market disruption. Concerns over liquidity led the agency to install a variety of facilities to dole out credit to households, companies and local governments that were struggling to stay afloat.
The extension is an acknowledgment that the U.S. economy could be months — or even years, experts say — from recovery: In the first three months of the year, the country’s gross domestic product — which represents the output of American goods and services — contracted at a seasonally adjusted annual rate of 5%. And although nonfarm payrolls improved by 4.8 million in June and the unemployment rate declined to 11.1%, the number of permanent job losers still surged by 588,000 to 2.9 million.
What’s more, a recent spike in infections from coast to coast has led a number of states, such as California, Florida and Georgia, to pull back on their reopening plans and reinforce lockdown restrictions. Today, more than 4.3 million people in the U.S. have been diagnosed with COVID-19 and at least 148,200 have died.
Currently, congressional leaders are mulling another relief package to bolster the economy. The measure, dubbed CARES Act 2, is expected to include a second round of stimulus checks, as well as an extension to unemployment benefits, liability protection for businesses and tax incentives to encourage Americans to get back to work.