Fed officials worried in April about toll of deep recession

WASHINGTON (AP) — Federal Reserve officials last month worried about the coronavirus pandemic's toll on the U.S. economy, especially its impact on the most vulnerable, expressing fears that a large number of small businesses may not be able to survive the shock.

Minutes of the Fed’s April 28-29 meeting released Wednesday showed that Fed officials fully supported continuing to keep the central bank's benchmark interest rate at a record low near zero. This while backing a number of emergency programs to keep parts of the financial system operating.

The minutes said that Fed officials believed the economy, as measured by the gross domestic product, would decline “at an unprecedented rate” in the April-June quarter.

The officials expected that “the burdens of the present crisis would fall most disproportionately on the most vulnerable and financially constrained households in the economy.”

The central bank policy making committee voted 10-0 to keep the Fed's benchmark interest rate near zero for the foreseeable future. It pledged to use its “full range of tools to support the U.S. economy at this challenging time.”

In recent appearances, including congressional testimony this week, Fed Chairman Jerome Powell has repeated that pledge and has also suggested that Congress and the administration may need to consider take additional steps to avoid the fallout of a more severe and drawn-out recession.

In his testimony Tuesday, Powell said that cascading bankruptcies among small businesses and extended unemployment remained a serious risk. While further government aid would be costly it would be “worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” he said.