Powell "Additional Action Possible... Not QE"

Indicates Possible Additional Rate Hike Instead of Quantitative Easing
Trump Pressures for Further Cuts Despite 0.5% Point Reduction
US Stock Market Falls Amid Disappointment

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), hinted at the possibility of additional interest rate cuts due to the impact of the novel coronavirus disease (COVID-19), but distanced himself from quantitative easing.

At a press conference held on the 3rd (local time) after deciding to cut the interest rate by 0.5 percentage points, Chairman Powell said, "The Fed will adjust monetary policy depending on the spread of COVID-19." However, he indicated that further monetary policy would lean more toward interest rate cuts rather than quantitative easing (QE) as implemented in the past.

Regarding the rate cut on that day, he stated, "Although the impact of the COVID-19 situation on the economy is very uncertain, the Fed has acted based on the risks." He also repeatedly emphasized that "we are ready to use policy tools and act appropriately."

This is the first time since the 2008 financial crisis that the Fed has cut interest rates without going through an FOMC meeting. The rate cut was a bold decision of 0.5 percentage points, not the usual 0.25 percentage points. This reflects the severity of the situation as judged by the Fed.

Steven Mnuchin, U.S. Treasury Secretary, supported the Fed's benchmark interest rate cut, emphasizing that it is not a political decision. Secretary Mnuchin appeared before the House Ways and Means Committee that day and said he supports the Fed's decision to cut the benchmark rate by 0.5 percentage points, adding, "This is not a political decision."

Despite the Fed's rate cut, President Donald Trump has demanded further rate cuts. President Trump claimed on his Twitter, "The Fed should do additional rate cuts or quantitative easing. The U.S. is playing an unfair game on a tilted playing field."

The fact that the U.S. stock market widened its losses despite the Fed's rate cut on that day is also fueling expectations for additional rate cuts. As of 12:40 p.m. that day, the Dow Jones Industrial Average was down 1.43% (382.45 points) compared to the previous day. The 10-year Treasury yield fell again, recording 1.026% during the session.

Chairman Powell also hinted at the possibility of policy coordination with major central banks. He said, "We are actively discussing with other central banks," and forecasted joint responses at the Group of Seven (G7) level. He explained, "The G7 statement reflects cooperation to use all policy tools."

In this regard, some foreign media reported that the European Central Bank (ECB) is preparing measures to provide liquidity to companies struggling due to COVID-19.

This content was produced with the assistance of AI translation services.