Congress nears US spending deal, with Fed to weigh in on economy

WASHINGTON: Congressional leaders on Wednesday said they were nearing a long-awaited agreement on a stimulus package for the US economy, while the Federal Reserve is set to provide updated forecasts on an uncertain outlook.

A federal relief package to aid struggling business and jobless workers is seen as essential in getting the world's largest economy back on its feet amid a resurgence of Covid-19 infections.

The worsening outbreak even as vaccines are rolled out, complicates the outlook. But federal relief would ease the pressure on the central bank, which has limited tools to help the economy amid signs the recovery is stalling.

"We made major headway toward hammering out a targeted pandemic relief package that would be able to pass both chambers with bipartisan majorities," Republican Senate Majority Leader Mitch McConnell said early Wednesday.

"We committed to continuing these urgent discussions until we have an agreement, and we agreed that we will not leave town until we've made law."

The progress comes as government data shows retail sales dropping sharply in November, which together with slowing employment gains, a resurgent wave of coronavirus infections and a pandemic death toll north of 300,000 in the US has increased fears of another economic downturn.

Despite months of negotiations, lawmakers in Washington have failed to break an impasse over a new package to follow the $2.2 trillion CARES act, which provided aid to businesses and expanded benefits to workers hurt by the pandemic that would not normally be eligible for regular jobless payments.

Without congressional action, millions of people could lose those benefits after Christmas.

The signs of compromise came after a bipartisan group of legislators floated an option with a smaller price tag, but excluding thorny provisions like aid for state and local governments and liability protection for businesses from Covid-related lawsuits.

The package is expected to include another round of direct payments to American taxpayers.

Democratic House Speaker Nancy Pelosi met with McConnell and other leaders late Tuesday, and legislators could attach their relief bill to a spending plan that keeps the government operating beyond the end of its current funding expiring at midnight Friday.

"We are close to an agreement. It's not a done deal yet, but we are very close," top Senate Democrat Chuck Schumer said.

President-elect Joe Biden welcomed the progress but said it is not enough.

"The stimulus package is encouraging. It looks like they're very, very close. And it looks like there's going to be direct cash payments," he told reporters at an event in Wilmington where he introduced more of his cabinet picks.

But Biden, who will take office January 20, said, the deal is only "a downpayment, an important downpayment on what's going to have to be done in the end of January into February."

The central bank's Federal Open Markets Committee (FOMC) is set to conclude its two-day meeting and announce its policy decision Wednesday at 1900 GMT, after which Fed Chair Jerome Powell will hold a press conference.

With interest rates firmly at zero, attention will be focused on the US economic outlook provided in the quarterly forecasts of the 17 FOMC members.

The rollout of the first Covid-19 vaccine and approval of a second expected soon has fueled optimism that business in the United States can begin to return to normal early next year, which could mean a more optimistic growth outlook.

But as US coronavirus infections continue to spike nationwide, more regions may experience business shutdowns, complicating the forecasts.

Government data show consumers became more reluctant to venture out last month, reflected in the 1.1 percent drop in retail sales, with the biggest decreases seen in restaurants and department stores that rely on in-person shoppers.