By Denny Gulino
WASHINGTON (MaceNews) – Federal Reserve Chair Jay Powell was as low key as possible in answering questions about the latest policy meeting as vote counts are deciding the next president but he did drop a hint that the asset purchase program may be in for some innovation.
“The recent rise in new COVID-19 cases, both here in the United States and abroad, is particularly concerning,” he said, emphasizing that control of the virus is crucially important to economic recovery.
“Overall economic activity remains well below its level before the pandemic,” he said, “and the path ahead remains highly uncertain.”
Only about half of the jobs lost at the beginning of the pandemic remain lost, he said, and the Fed intends to maintain its zero-rate accommodation as long as necessary to get back to something near full employment.
He repeated the Fed, under its new policy framework, is ready to let inflation run above target for a while, if that ever becomes possible.
Most intriguing, among a range of topics Powell touched on in a news conference that was otherwise pretty standard fare, was a couple of references to this latest meeting’s discussion of asset purchases.
When asked what would cause the Fed to shift more purchases to long-term securities and change the amounts being purchased, Powell answered that, “There are a number of parameters that we have where we can shift the composition, the duration, you know, the size, the life cycle of the program.”
He said one of the things the latest meeting “was about is analyzing the various ways and having a good discussion about how to think about those various parameters, which I thought was quite a useful discussion.”
The FOMC participants “may reach a view at some point that we need to do more on that front.”
Powell said the coin shortage caused by the pandemic’s reduction of cash transactions is significantly better now but apparently not entirely eliminated.
He said he was not going to prescribe what Congress should do but that many on Capitol Hill agree there is a need for more pandemic relief.
“We’ve said from the very beginning,” he said, “that this particular situation we find ourselves in is where there’s a sudden loss of income on the part of millions and tens of millions of people. It’s not so much a typical recession where demand weakness, the Fed cuts interest rates, interest rates stimulate demand, and the economy recovers.”
Instead there has been a “sudden shock where tens of millions of people are out of work.” The original spending approved by Congress “was, frankly, I think, very good and very robust in the United States. It’s certainly one of the main reasons why the recovery has been as good as it’s been so far.”
On that subject he concluded, “I do think fiscal policy’s absolutely essential here. Stimulating aggregate demand is one thing, but where there’s a part of the economy that kind of will be resistant to that, you also need fiscal policy.”
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Contact this reporter: denny@macenews.com.
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