The Federal Reserve put a spotlight on job losses and risks to the financial sector in its semi-annual report to Congress released Friday.

“Despite increased resilience from the financial and regulatory reforms adopted since 2008, financial system vulnerabilities -- most notably those associated with liquidity and maturity transformation in the nonbank financial sector -- have amplified some of the economic effects of the pandemic,” the Fed said. “Accordingly, financial-sector vulnerabilities are expected to be significant in the near term.”

The central bank also highlighted the risks to the economy and job losses, with a section dedicated to the topic.

The Fed’s policy committee this week voted to keep interest rates near zero and central bankers penciled in no rate hikes through 2022.

In their first forecasts since December, Federal Open Market Committee participants projected an unemployment rate of 9.3 per cent at year’s end, edging down slowly over the next two years, with inflation below the Fed’s 2 per cent target through 2022 amid weak demand.

Small Businesses

“The outlook for the pandemic and economic activity is uncertain. In the near term, risks associated with the course of COVID-19 and its effects on the U.S. and global economies remain high,” the report noted. “A wide variety of data reveal an alarming picture of small business health during the COVID-19 crisis.”

Fed Chairman Jerome Powell, in his press conference Wednesday, suggested it will take years for the economy to regain the more-than 20 million jobs lost due to the coronavirus-induced recession, calling the impact “heartbreaking” on lower-income workers and minorities.

The semiannual report precedes Powell’s testimony to Congress starting Tuesday with an appearance before the Senate Banking Committee. The Monetary Policy Report released Friday is aimed at informing the Congress of the Fed’s outlook and sense of risks to U.S. and global growth.

The central bank has unveiled nine emergency lending programs to keep credit flowing during the pandemic, though one of the most eagerly awaited, a facility aimed at Main Street businesses, has yet to be launched.

On Monday it expanded this program to include smaller companies and said it would be open to eligible lenders “soon.” Powell repeated this outlook Wednesday and also said the Fed was looking very strongly at how it could incorporate non-profit organizations in either the Main Street program or in a facility of its own.