Larry Kudlow sees ‘low probability’ of stimulus before US election

Larry Kudlow, the top White House economic adviser, said there was a “low probability” that Congress would agree with Donald Trump’s call for a series of piecemeal stimulus measures to help the US economy.

His comments on Wednesday came after a day of confusion over the US president’s stance on providing further aid to households and businesses hit by the pandemic.

In an interview with CNBC, Mr Kudlow said Mr Trump had ditched negotiations on a broader fiscal relief bill on Tuesday because there was not enough time before the November election and Democrats had failed to compromise sufficiently.

The move to call off the talks led by Nancy Pelosi, the House speaker, and Steven Mnuchin, the US Treasury secretary, led to a sell-off in equity prices on Tuesday.

But late on Tuesday, the US president said he was still open to targeted aid for airlines, small businesses, as well as cheques to American individuals — causing global equities to recover some ground.

Such a piecemeal approach to stimulus legislation had previously been floated by Republican lawmakers and the White House, but dismissed as woefully insufficient by Democrats.

Mr Kudlow said he could not make a prediction on whether the talks could be reignited on that basis, but said that it was “low probability stuff”.

Democrats have been pushing for $2.2tn in new spending, whereas the Trump administration had been willing to go up to $1.6tn, with many Republican lawmakers on Capitol Hill saying even that was excessive.

The biggest sticking point in the negotiations was the Democratic demand for aid to cash-strapped state and local governments, without which they will have to push through aggressive budget cuts.

The end of talks would leave many US households and businesses, from restaurants to airlines and hotels, facing further financial distress in the coming weeks.

Jay Powell, chair of the Federal Reserve, said on Tuesday that the economic recovery “will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods”.