Hopes for U.S. fiscal stimulus are not dashed, but fading with respect to any near-term implementation. While the Federal Reserve remains committed to providing substantial monetary policy support to the economic recovery, minutes of their September meeting reveal the Committee’s view that fiscal policy is the optimal response to generate more targeted economic stimulus from here. The outcome of the U.S. presidential election will be crucial in that regard, with potentially immense ramifications for the fiscal support of the economy.
While interest rates remain low overall, the 10-year Treasury rate edged higher over the month of September. (Bond prices fall as rates rise.) Riskier assets lost favor with investors amid fiscal policy and election uncertainty in the United States coupled with a pickup in COVID infections in Europe.