Powell: "Economic Crisis is Serious, Congress Must Also Act" (Comprehensive)

Concerns Over Further Deterioration of Economic Conditions in Q2
Prolonged Zero Interest Rates and Asset Purchases Announced
Emphasis on Need for Additional Fiscal Measures Beyond Monetary Policy
Corporate Loans to Support Real Economy Also Expected Soon

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), described the economic deterioration caused by the novel coronavirus infection (COVID-19) as severe and reiterated his commitment to do whatever it takes to stabilize the market. He also argued that, since monetary policy alone has limitations in overcoming the crisis, efforts at the congressional and government levels to expand fiscal support are necessary.

Jerome Powell (top left in the photo), Chair of the Fed, is holding a virtual press conference with reporters on the 29th.

On the 29th (local time), Powell stated at a virtual press conference held after the Federal Open Market Committee (FOMC) decided to keep the benchmark interest rate unchanged, "U.S. economic activity is expected to decline at an unprecedented pace in the second quarter." He repeatedly emphasized the serious impact COVID-19 is having on the economy.

With the U.S. first-quarter Gross Domestic Product (GDP) growth rate announced that day at -4.8%, the worst result since the 2008 financial crisis, it foreshadowed that the situation in the second quarter would worsen further.

He described it as "a very special and extraordinary shock that I never thought would happen in my lifetime."

Powell stressed that the Fed would use all available tools to support the recovery of the U.S. economy. The statement released by the Fed that day also repeatedly highlighted the severity of the economic crisis and unemployment caused by COVID-19, expressing a sense of urgency. The Fed stated it would maintain zero interest rates until maximum employment and a 2% inflation target are achieved.

Although the Fed did not provide specific forward guidance, it clearly expressed its intention to maintain zero interest rates for an extended period. Powell explained, "We will not easily withdraw the policies implemented during the crisis."

Powell suggested that Congress needs to do more for economic recovery and that the Fed could also take additional measures. When asked whether more support was needed despite the government and Congress deciding on a $2.6 trillion support package, he answered, "Yes. It is necessary."

The Wall Street Journal commented, "Powell usually refrains from mentioning the roles of Congress and the government, but that was not the case this time." This emphasized that overcoming the crisis is difficult with monetary policy alone and that more efforts, including fiscal policy, are required.

The Fed also announced plans to expand lending programs to support the real economy (Main Street), not just financial firms (Wall Street). Since this crisis in the U.S. is one of the real economy rather than a financial crisis, voices are growing that the Fed should increase support for businesses to defend the real economy following the financial industry. This means expanding the Fed’s role as the "bank of banks" and "lender of last resort" to the real economy.

Coincidentally, on the same day, Steven Mnuchin, U.S. Treasury Secretary, revealed that $259 billion in funds are being reserved to support additional Fed stimulus policies. The Fed can leverage this amount to provide ten times the funding. Regarding this, Powell indicated, "Preparations for corporate loans are in the final stages and will be announced soon." Earlier, The Washington Post reported that the Fed is preparing a $500 billion loan program to support large corporations.

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