In a livestream aired on Wednesday, Federal Reserve Chairman Jerome Powell confirms that the Fed will continue to buy Treasury and mortgage-backed securities as needed to preserve “smooth market functioning” and stabilize the free-falling economy amid the coronavirus pandemic.
Speaking with reporters on Wednesday following the central bank’s two-day policy meeting, Powell says that the Fed is deploying unprecedented lending powers with support from Congress and the Treasury until the economy is solidly on the road to recovery.
“We’re going to see economic data for the second quarter that’s worse than any data we’ve seen for the economy. And they are a direct consequence of the disease and the measures we’re taking to protect ourselves from it.”
In terms of fiscal concern, Powell says that long before the pandemic he has been an advocate for getting the country back on a sustainable path.
“We have not been on such a path for some time which means that the debt is growing faster than the economy. This is not the time to act on those concerns. This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible.
The time will come again, and reasonably soon, I think, where we can think about a long-term way to get our fiscal house in order, and we absolutely need to do that. But this is not the time, in my personal view, to let that concern – which is a very serious concern – to let that get in the way of us winning this battle.”
Powell says the next phase will be the reopening of the economy. He expects it to be slow and highly unpredictable.
“It’ll start to pick up as people start to return to their normal patterns of spending. But the chances are that it won’t go right back to where we were because until [people] are confident that the virus is truly under control, then they will be, probably, somewhat reluctant to undertake certain kinds of activity.
So it may take some time — it probably will take some time for us to get back to a more normal level of unemployment and, ultimately, to maximum employment.”
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