Early last week, the Federal Reserve held its Federal Open Markets Committee (FOMC) policy session. At this meeting, Chairman Jerome H. Powell and the other committee members debated the FOMC’s next moves for supporting the economy moving into the latter part of 2020.
New Economic Projections
As part of last week’s meeting, the Federal Reserve released revised economic projections for the remainder of the 2020 fiscal year. This set of projections are the first to be released since December 2019. At the end of last year, policymakers anticipated a two percent growth in gross domestic product (GDP) and a low unemployment rate of 3.5 percent. The updated projections show a GDP decline of 5.6 percent and a 9.3 percent unemployment rate. (The latest forecast from the bipartisan Congressional Budget Office shows similar figures.)
By the end of 2020, the Federal Reserve expects the economy to resemble what it was circa 2009. (For context, the country was, at that time, in the midst of what is now known colloquially as “The Great Recession.”) With that fact in mind, it comes as no surprise that FOMC Chairman Jerome H. Powell said the following in a post-meeting press conference: “We’re not thinking about raising rates.”
The U.S. Economy Is in a Recession
The National Bureau of Economic Research (NBER) recently announced that the United States entered a recession as of February 2020. This marks the end of an economic expansion that lasted for 128 months. The length of the current recession will be determined by several factors, including domestic production and rates of employment.
Although more people have either gone back to work or have found new employment opportunities as states have begun to reopen, employment rates continue to remain high. This, plus the patchwork approach to reopening and a sharp decline in demand, has led to a promise from the Federal Reserve to not raise interest rates, at least for the time being.
New and Expanding Programs
In the face of the COVID-19 pandemic, the country’s central bank has worked to reactivate and expand emergency programs that were put in place during The Great Recession. The Federal Reserve implemented liquidity programs back in March, which flooded the country’s financial system with around $3 trillion. While this did lead to some improvement in market conditions, the Federal Reserve has had trouble setting up its two new credit programs: the Main Street Lending Program and the Municipal Liquidity Facility.
The Main Street Lending Program was created to provide credit to mid-sized businesses that are considered “too large” to receive government-backed small business loans. The program was established with approximately $75 billion in equity provided by both the Treasury Department and the CARES Act. On June 15, the Federal Reserve announced a proposal that would expand its current Main Street Lending Program to include nonprofit organizations.
Navigating These Uncertain Times
Ground + Space is a leading commercial real estate firm that specializes in single-tenant and retail NNN investments. In these uncertain times, there is still a high demand for income-producing assets leased to credit-rated tenants. We have several listings available featuring retailers that are in a prime position to succeed in a post-pandemic economy. We are committed to providing up-to-date information and best-in-class services to clients during the COVID-19 pandemic and beyond. The market changes daily, so please contact one of our brokers for specialized guidance during this time.
Stay Healthy and Safe
The Centers for Disease Control and Prevention (CDC) offers daily updates and other information about COVID-19 symptoms and testing in the United States. Johns Hopkins University (JHU) has created a resource to help inform the public and advance comprehensive understanding of the novel coronavirus and its effects backed by experts in global public health, infectious disease and emergency preparedness. Additionally, the World Health Organization (WHO) continues to track the number and location of confirmed cases of the virus across the globe.