After taking a series of emergency actions to support the economy during the coronavirus outbreak, lowering interest rates and buying more securities, the chairman of the Federal Reserve did something else extraordinary: He sat for a live television interview.
In an exclusive interview with Savannah Guthrie on the "TODAY" show, Fed Chairman Jerome Powell explained the central bank’s recent decisions to the American people.
“The Federal Reserve is working hard to support you now,” he said. “Our policies will be very important when the recovery does come, to make that recovery as strong as possible.”
In recent weeks, economists have grappled with the magnitude of the outbreak’s current and future effects on the U.S. economy. During the interview, the Fed chair offered his own assessment, noting the current downturn is unprecedented.
“We may well be in a recession,” he said. “But I would point to the difference between this and a normal recession. There is nothing fundamentally wrong with our economy. Quite the contrary. We are starting from a very strong position.”
As Americans have been encouraged to stay home, small businesses have closed and laid off workers. States and municipalities have placed restrictions on commerce. That has frustrated President Donald Trump, who has suggested calls to curtail economic activity will diminish his odds of reelection.
“WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” he tweeted earlier this week.
Asked about the president’s recent suggestion, that the economy could be open again by Easter Sunday, which falls on April 12, the Fed chair sided with other experts, including Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases and a key member of Trump's coronavirus task force.
“The virus is going to dictate the timetable,” Powell said. “The sooner we get through this period, and get this virus under control, the sooner the recovery can come.”
After two rounds of emergency cuts, which brought interest rates to near-zero, the Federal Reserve announced plans to buy more bonds and other types of securities. In a statement, the Fed said there was essentially no limit to how long those programs would be in place.
“It is not a blank check in the sense that we are limited by the ability to take losses,” Powell said, noting the Fed’s emergency lending is dependent on getting a backstop from the Treasury Department. “Effectively, $1 of loss-absorption is worth $10 worth of loans.”
Powell's comments come the morning after the Senate overwhelmingly passed a massive $2 trillion rescue package, the government's own response to the harsh economic blow from the coronavirus pandemic.
The Senate approved the 880-page bill in a unanimous 96-0 vote. The measure would provide billions of dollars in credit for struggling industries, a significant boost to unemployment insurance and direct cash payments to Americans.
Asked about criticism that the Fed has few resources left to blunt a crisis, because of the breadth of its bond-buying program and how low interest rates are, Powell was adamant he and his colleagues aren’t lacking the tools they need.
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“When it comes to lending, we are not going to run out of ammunition,” he said. “That just doesn’t happen.”
Powell’s loudest critic is the president, who has publicly attacked the chairman and his decision-making since his tenure as chairman began. In the interview, Powell stressed the Fed’s independence.
“My colleagues and I here are totally focused on our mission of serving the American people,” he said. “We try to do the absolutely best in a way that is completely nonpolitical and nonpartisan.”