Fed will act ‘forcefully, proactively, and aggressively’ to support the US economy
Federal Reserve Chairman Jerome Powell said Thursday that the Fed is “doing all we can” to support the U.S. economy through the novel coronavirus.
“We will continue to use these powers forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery,” Powell said in a webcast with the Brookings Institution.
Earlier in the morning, the Fed announced $2.3 trillion in funding supported by the U.S Treasury and money appropriated through the Coronavirus Aid, Relief, and. Economic Security (CARES) Act. In addition to offering more details on a Main Street Lending Program, the Fed also said it will open up a facility dedicated to buying short-term municipal debt and would expand its existing facilities in size and scope.
Powell said the Fed is using its tools to “provide a measure of relief and stability” and to set the economy up for a “vigorous” recovery when the health implications of the virus are properly addressed. Until then, Powell said he expects “very high, although temporary, levels” of unemployment.
The central bank had already slashed rates to near zero in mid-March. Powell said the Fed would keep rates at the zero-bound “until we are confident that the economy has weathered the storm and is on track to achieve our maximum-employment and price-stability goals.”
US Federal Reserve Chairman Jerome Powell gives a press briefing after the surprise announcement the FED will cut interest rates on March 3, 2020 in Washington,DC. – The US Federal Reserve announced an emergency rate cut Tuesday, responding to the growing economic risk posed by the coronavirus epidemic and giving President Donald Trump the stimulus he has called for. In a unanimous decision, the Fed’s policy-setting committee slashed its key interest rate by a half point to a range of 1.0-1.25. (Photo by Eric BARADAT / AFP) (Photo by ERIC BARADAT/AFP via Getty Images)
Powell said the liquidity tools deployed by the Fed, in conjunction with the U.S. Treasury, are emergency tools meant to address “very unusual circumstances.” Powell emphasized that the trillions of dollars provided by the Fed are “lending” powers and not “spending” powers.
The Fed chairman also insisted that once markets appear to be functioning properly when the economy recovers, the Fed will “put these emergency tools away.”
Powell reiterated that setting the economy up for recovery relies on controlling the spread of the virus, which the Fed cannot directly address.
Powell added that as Congress works through additional legislation on coronavirus relief, hospital workers, emergency services, and care facilities — those “suffering for the public good” — should be the priority for getting help.
“In the meantime, we are using our tools to help build a bridge from the solid economic foundation on which we entered this crisis to a position of regained economic strength on the other side,” Powell said.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.