Federal Reserve Chairman Jerome Powell pledged on Wednesday that the central bank would continue to use its “full range of tools” to cushion the economic blow caused by the coronavirus. by Congress and lamented that the United States was not in better fiscal shape in the months and years leading up to the current crisis.
With millions of people out of work and economic growth slowing at a rate not seen since the financial crisis, the Fed said on Wednesday it would keep interest rates near zero until after a recovery is well underway.
“The way forward is very uncertain, but we will be there with our tools, supporting the economy and supporting this recovery,” said Powell.
While the central bank did not announce any new policy action on Wednesday, Powell said he expects the previously announced corporate credit facilities “to work fairly quickly”; under these programs, the Fed will buy certain types of riskier corporate debt that it has historically avoided.
Powell reiterated that the Fed’s tools are limited to loans rather than spending or granting; the Fed can offer loans to businesses affected by the crisis, but it must do so in the hope that the companies to which it lends will be able to repay the money.
Powell said that while the national debt is currently growing faster than the economy (with levels expected to reach $ 3.7 trillion by the end of this fiscal year), “now is not the time to ‘act on these concerns “.
However, he acknowledged that the current crisis “shows you the importance of getting your finances in order. . . ideally you would go into an unexpected shock like this with a much stronger budget posture. “
Over the past month, the Fed has rewritten its strategy and made unprecedented interventions to support the economy. It announced new emergency initiatives worth trillions of dollars, including programs that will expand its reach to small and medium-sized businesses, as well as state and municipal governments, two new market entries. that the Fed has historically avoided. He also cut rates to near zero, stepped in to support a $ 350 billion small business emergency loan program administered by the Small Business Administration, and bought billions of dollars in government debt and securities. mortgage backed.
“We are not going to be in a rush to withdraw these measures or take off. We’re going to wait until we’re confident enough that the economy is on the road to recovery, ”Powell said.
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