The Federal Open Market Committee of the Federal Reserve convenes today for the second day of its regularly scheduled June policy meeting.
Since slashing interest rates to 0-0.25% in March, the Fed has concentrated its efforts on increasing market liquidity through various credit and asset purchasing facilities, reflecting Chairman Jerome Powell’s hesitation to deploy negative interest rates. Considering a decline in unemployment claims, a strong May jobs report and an increasing number of states reopening to economic activity, it is unlikely that today’s meeting will result in a rate adjustment.
Instead, close attention will likely be paid to any updates on the Main Street Lending Programme, which has been marred by delays and participation requirements that bankers and business leaders have described as prohibitively strict. The $600 billion program is intended to aid businesses that are too large for the Paycheck Protection Programme but also too small to benefit from the bond purchasing facilities. However, a high minimum loan amount, increased transparency measures and underwriting risk concerns have prompted fears that many businesses and banks will not participate. Delays up to this point have been blamed on the logistical challenges associated with tailoring individual loans, a key feature of this program. Nevertheless, the Fed is committed to getting the program online, so expect it to relax the terms for both lenders and borrowers to boost participation.
Wake up smarter with an assessment of the stories that will make headlines in the next 24 hours. Download The Daily Brief.
Julian is a Research Analyst for The Daily Brief where he is a regular contributor. As a researcher and writer, Julian specializes in the political economy of East Asia and global macroeconomic developments.