–‘Not Going To Run Out of Money’
–Time to Use the ‘Great Fiscal Power’ Of the Country
By Denny Gulino
WASHINGTON (MaceNews) – The Federal Open Market Committee, echoed by Federal Reserve Chair Jay Powell, Wednesday signaled only firm determination to fight the damage from the economic shutdown, whatever it takes, reassuring the markets, Wall Street and Main Street it’s “not going to run out of money.”
Powell, in his post-FOMC meeting news conference, acknowledged that the economic shutdown may well need more fiscal remedies and stimulus from Congress, that the eventual recovery may not initially be very pronounced and that there are risks ahead.
Yet he looked forward to a “robust as possible” recovery as workers return to job sites if a second wave of virus attack can be avoided.
Meanwhile, “We are still putting out the fire. We are still trying to win. I think we will be at that for a while,” he said. “It’s an extraordinary shock, unlike anything certainly that’s happened in my lifetime.”
The combination of the reassuring words from Powell and his colleagues and the day’s news of some solid progress in proving the anti-viral remdesivir has some positive effect on virus mortality boosted U.S. stocks although buying flagged at the very end of the session.
The Dow industrials finished 2.2% higher, a gain of 532 points to 24633,86. The S&P 500 rose 2.7% and the Nasdaq was up 3.6% at the close. The small-capitalization stock index, the Russell, turned in the best performance as it has in other recent sessions, a 4.8% increase. After-hours trading kept up the pace.
Powell contrasted the Fed’s open-ended lending programs and the Main St. support that is soon take hold to the stop-and-go Paycheck Protection Program of Treasury and the Small Business Administration.
“We won’t run out of money,” he told reporters. “It’s not a limited pot. There won’t be this incentive to try to get there first and that sort of thing.”
The big concern during normal times, an unsustainable government spending and borrowing path, is no long front and center, though it remains unfinished business.
“I have long time been an advocate … of the need for the United States to return to a sustainable path from a fiscal perspective at the federal level,” he said. “We have not been on such a path for some time which means that the debt is growing faster than the economy.”
However, he added, “This is not the time to act on those concerns. This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer run productive capacity of the economy as possible.”
He warned that, “The time will come, again, and reasonably soon I think, where we can think about a long-term way to get our fiscal house in order and we absolutely need to do that.”
The FOMC policy statement, never expected to announce any pitch into negative interest rates, recommitted the central bank “to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.”
Powell looked ahead to better times “sometime fairly soon here, and probably gradually and at different paces at different parts of the country.” At some point, he said, “We will see social distancing measures rolled back. People will begin to spend more money.”
Even with the beginning of recovery, Powell said the unemployment rate should be be expected to “get anywhere near the historically low levels that we had as recently as February, three and a half percent. It will take time.
“But, the main thing, we want is get back on the road, get that recovery going, and get people back to work as fast as we can.”
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Contact this reporter: denny@macenews.com
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