WASHINGTON (Reuters) – The dangers of coming enterprise failures “stay appreciable” in america even because the economic system emerges from the coronavirus pandemic, the Federal Reserve stated on Friday in its semi-annual financial coverage report back to Congress.
Enterprise borrowing “now stands close to historic highs,” the U.S. central financial institution stated within the report. Although giant money balances, low rates of interest, and renewed financial progress might dampen issues within the close to time period, “insolvency dangers at small and medium-sized corporations, in addition to at bigger corporations, stay appreciable.”
Whereas banks and family steadiness sheets stay in cheap form, the touch upon enterprise debt highlights the likelihood that the post-pandemic restoration might undergo as firms work via the overhang of loans taken on to attempt to get via a traditionally making an attempt yr.
Fed Chair Jerome Powell will current the report in hearings earlier than the U.S. Senate Banking Committee on Tuesday and the U.S. Home of Representatives Monetary Providers Committee on Wednesday. He’ll area questions from lawmakers after presenting his personal abstract of the place the economic system stands.
Will probably be Powell’s first look on Capitol Hill since Democrats received the White Home and management of each chambers of Congress.
He’ll converse because the economic system enters a transition from the coronavirus disaster that has dominated U.S. life and livelihoods for the previous yr to an accelerated reopening and restoration because the affect of latest vaccines is extra totally felt.
The Fed has pledged to maintain its present coverage of low rates of interest and $120 billion in month-to-month bond purchases intact till the restoration is extra full. That could be examined in coming months if, as anticipated, the reopened economic system begins to generate rising inflation.
(Reporting by Howard Schneider; Enhancing by Paul Simao)
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