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Federal Reserve Board Chairman Powell’s Resolve on Display
“There is nothing
fundamentally wrong with the economy” – Federal Reserve Board Chairman Jerome Powell, March 26, 2020
Yesterday morning the chairman of the Federal Reserve Board, Jerome Powell, was interviewed On NBC’s TODAY show. He was there to answer questions concerning the Fed’s actions and to share indications of what’s in store for families and companies in light of the pandemic’s strains on the economy. For the Fed Chairman to appear on a morning talk show is an indicator by itself. It indicates an effort to keep the country informed, patient, and onboard. It is also is an indicator of how important it is for the Fed to explain to people beyond the bankers and corporate executives so they understand all the government is doing and steps being taken related to the economy. Additionally, it allowed him to speak to citizens about where they are right now — And where they are is home, watching shows like TODAY.
He was interviewed by show host Savannah Guthrie who was very direct as she lead off with this very pointed question. “The Federal Reserve doesn’t exactly print money, but as one writer put it, you do have the ability to conjure money out of thin air. My question is simple; is there any limit to the amount of money the Fed is willing to put into this economy to keep it afloat? Is it a blank check?” The Fed Chairman responded by explaining their emergency lending authority and the full security they require for lending. He said, “…they don’t lose money.” Powell then went on to explain, “…essentially the answer to your question is no, we can continue to make loans. The point of all that is to support the flow of credit in the economy, including households and businesses.”
Other points worth noting is Federal Reserve Chairman Jerome Powell said the economy may be in recession as a result of the coronavirus pandemic but has the potential to rebound depending on how quickly the virus is contained. The reason he gave is that the economy was at a 50-year low in unemployment and in a strong position before CoVID-19 spread to the U.S. “We may well be in a recession,” said Powell during the interview, but added this recession is different from normal, and there is nothing “fundamentally wrong” with the economy.
Throughout the interview, it seemed important for the TODAY show guest to make clear that this is a unique situation, not a typical downturn. “This is a situation where people are being asked to step back from economic activity, close their businesses, stay home from work,” Powell explained. “In principle, if we get the virus spread under control fairly quickly, then economic activity can resume, and we want to make that rebound as vigorous as possible.”
Earlier this month, the Federal Reserve Federal Open Market Committee cut the overnight lending rate target to zero percent.
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