Federal Reserve Chairman Jerome Powell said Wednesday that the Fed is committed to “using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.”
That includes keeping interest rates very low.
“In March, we quickly lowered our policy interest rate to near zero, where we expect to keep it until we are confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals,” he said.
In speaking with reporters after the Fed meeting, Powell stressed the public health crisis caused by the coronavirus pandemic is far from over – and the economic impacts will are expected to be felt for a long time.
“The extent of the downturn and the pace of recovery remain extraordinarily uncertain and will depend in large part on our success in containing the virus,” Powell said. “We all want to get back to normal, but a full recovery is unlikely to occur until people are confident that it is safe to reengage in a broad range of activities. The severity of the downturn will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery when the public health crisis passes.”
Powell also noted the need to keep credit flowing to individuals and businesses – something that has been a challenge in recent months. The Mortgage Bankers Association announced Tuesday that mortgage credit tightened in May for the sixth straight month – with availability down 32 percent since November.
The Federal Reserve Bank of New York said in a statement it will increase holdings of Treasury securities at its current pace of $80 billion per month and mortgage-backed securities at about $40 billion a month.
“We have also been taking broad and forceful actions to support the flow of credit in the economy,” Powell said. “Without access to credit, families could be forced to cut back on necessities or even lose their homes. Businesses could be forced to downsize or close, resulting in further losses of jobs and incomes and worsening the downturn. Preserving the flow of credit is thus essential for mitigating the damage to the economy and setting the stage for the recovery.”