On Sunday at 11:55 p.m., an agreement was reached in the U.S. Congress for the $900 billion fiscal stimulus bill that will relieve the impact of the Covid19. This program represents 4.2% of US GDP. Today, the House is expected to vote on the bill, followed by the Senate.
As markets digest news from the UK regarding the 70% more infectious strain of coronavirus and another missed Brexit deadline over the weekend, headlines from the US around the stimulus package may have gone unnoticed.
As explained by Link Securities, this news was much awaited/desired by investors:
“They see this relief program as “a bridge” for the US economy to avoid entering a recession until the pandemic is controlled by vaccines.”
In fact, Senate Majority Leader Mitch McConnell, Senate Democratic leader Chuck Schumer and House Speaker Nancy Pelosi announced the accord. The plan includes $600bn of direct payments and $300bn weekly payments in enhanced unemployment benefits through march. Programmes that were set to expire on Dec 26 would also continue. Additionally, there would be a $284bn plan for the Paycheck Protection Program providing loans to small businesses.
Thus, more specifically, this stimulus package is necessary to avoid a sharp fall in the income of American households at the end of the year. The analysts at Bankinter state:
“These measures include unemployment benefits and other support actions such as freezing student loans, halting evictions, and deferring mortgage payments. In addition, the labor market was showing clear signs of slowing down due to the new Covid resurgence and the containment measures implemented.”