Fed’s Powell: Fed is not out of ammunition, can do more if required – 60 Minutes interview
|While playing down the risk of the US entering a second great depression, in a 60 Minutes interview, Federal Reserve's Chairman Jerome Powell argues that the Fed is not out of ammunition and can do more if required.
Key comments
We're not out of ammunition, not by a long shot.
20-25% peak unemployment projection sounds about right.
There's really no limit to what we can do with these lending programs that we have. So there's a lot more we can do to support the economy, and we're committed to doing everything we can as long as we need to.
If we are thoughtful and careful about how we reopen the economy so that people take these social distancing measures forward and try to do what we can not to have another outbreak...then the recovery can begin fairly soon.
Fed not out of ammunition "by a long shot," can expand existing programs or add new ones, add to asset purchases as needed.
Eeconomy can start getting better "fairly soon," but full recovery from pandemic will require restoration of confidence.
Reasonable "base case" to expect additional job losses through june, with unemployment rate falling in second half of year.
"Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year."
"For the economy to fully recover people will have to be fully confident and that may have to await the arrival of a vaccine."
"By keeping people and businesses out of insolvency just for maybe three to six more months....we can buy time with that," as health authorities work on virus control. "That kind of support may be appropriate."
US needs to find path "to a more inclusive prosperity" in the future.
Medical metrics" and spread of virus most important data for fed right now in determining path of economy.
Market implications
If it isn't enough that the US is dealing with COVID-19, markets are also tuning into a war of words from the two most powerful economies in the world, the US and China. Trade wars, COVID-19 backlash and now shows of muscle power on the nuclear arms front:
However, sticking with Powell, the bond market will be the one to watch. As yields on the 3 and 5 years head closer towards zero, it will be a signal that rates will indeed be turning negative, despite Powell's arguments that negative rates will not suit the US economy, and pointing to a far deeper and longer recession.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.