The Federal Reserve will continue to use all the tools at its disposal until the US economy begins to fully rebound from the harm caused by the novel coronavirus outbreak, Fed Chair Jerome Powell said today, even as he acknowledged the limits of the bank's powers.
"Many of the programmes we are undertaking to support the flow of credit rely on emergency lending powers.
"We will continue to use these powers forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery," Powell said in prepared remarks for an online event hosted by the Brookings Institution.
Jerome Powell said there was every reason to think the economic recovery, when it comes, would be "robust," noting that the strength of the economy before the outbreak shut down large parts of the country should support a firm rebound.
Since early March, the Fed has launched an historic economic rescue plan in a bid to blunt the impact of the virus. Policymakers have slashed interest rates to near zero, resumed large-scale asset purchases and rolled out an array of programmes to stabilise financial markets.
Powell said the Fed's emergency tools would only be retired once "private markets and institutions are once again able to perform their vital functions" but reiterated that the Fed is a lending, not spending institution.
"The critical task of delivering financial support directly to those most affected falls to elected officials," he said. "There will also be entities of various kinds that need direct fiscal support rather than a loan they would struggle to repay."
Congress passed a $2.3 trillion rescue package late last month to deliver cash to households, and grants and loans to businesses. A second wave of help is currently being considered.
Earlier today, the Fed launched a broad, $2.3 trillion effort to bolster local governments and small and mid-sized businesses in its latest move to reduce the economic harm faced by the world's largest economy.
The Fed has pledged a "whatever-it-takes" approach to keep credit flowing to businesses and households, with more than 95% of Americans under "stay-at-home" or "shelter-in-place" orders.
The number of Americans seeking unemployment benefits in the last three weeks topped 15 million, Labor Department data released today showed, and Fed policymakers expect a sharp contraction in economic growth for the second quarter.
"We are moving with alarming speed from 50-year lows in unemployment to what will likely be very high, although temporary, levels," Powell said.
"As a society, we should do everything we can to provide relief to those who are suffering for the public good," he added.