Tag: Federal reserve

Fed changes its approach to inflation, as leaders aim to navigate future crises and reach full employment

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“This change may appear subtle, but it reflects our view that a robust job market can be sustained without causing an outbreak of inflation,” Fed Chair Jerome H. Powell said Thursday.

Federal Reserve Chair Jerome H. Powell on Thursday announced a major shift in the way the central bank aims to achieve maximum employment and stable prices, marking lessons learned from the most recent economic expansion.

The new approach signals that the Fed won’t increase interest rates to respond to low unemployment levels and also won’t worry as much about low rates triggering a rise in prices.

Speaking at the Fed’s yearly economic policy symposium in Jackson Hole, Wyo., Powell emphasized achieving full employment. As the Fed debuted a long review of its monetary policy framework, the Fed concluded that inflation could temporarily run a bit over its 2 percent target if that means more Americans stay in the workforce. Continue reading.

Fed’s Powell urges Congress to spend on unemployed in pandemic

Fiscal policy has more immediate effect, Fed chairman says

Federal Reserve Chairman Jerome Powell on Tuesday urged Congress to spend more money to limit the economic damage of the COVID-19 pandemic, the latest in a chorus of current and past Fed officials to tell lawmakers that inaction could lengthen the recession.

“There’s a reasonable probability that more will be needed both from you, and from the Fed,” Powell told the Senate Banking Committee, echoing nudges he has made in nearly every public statement since the pandemic began.

Powell has noted that COVID-19’s economic devastation has fallen hardest on low-income workers — 40 percent of individuals making under $40,000 lost their jobs during the crisis. Continue reading.

Fed Chair to Congress: Do Whatever It Takes to Keep the Economy From Collapse

New York Times logoIt’s a reversal of the usual relationship between elected officials and independent central bankers.

There were many thousands of viewers watching Federal Reserve Chair Jerome Powell’s news conference on Wednesday afternoon, between various online feeds and financial news networks. But his most important message was directed at just 536 people.

That would be the 435 members of the House of Representatives, the 100 members of the United States Senate, and the president of the United States.

The Fed has taken expansive efforts to prop up lending markets in the United States, pledging to inject trillions of dollars of support into the markets, including for corporate bonds (big companies), bank lending (midsize companies), mortgage-backed securities (home buyers) and municipal bonds (states and localities). Congress has encouraged this, authorizing billions to the Treasury to be combined with Fed resources. Continue reading.

As Trump talks rebound, Fed’s Powell warns economy’s pain will last

The Fed chief’s comments suggest the U.S. economy could face a rocky path for at least the next year as it attempts to rebuild.

President Donald Trump is hoping the economy will bounce back rapidly from the coronavirus shutdown, but Federal Reserve Chair Jerome Powell warned Wednesday that it will take time for the country’s wounds to heal even after businesses begin to reopen.

After the Fed pledged to keep interest rates near zero until the economy has weathered the pandemic, Powell underscored the bleak reality, saying next week’s monthly jobs report is expected to show an unemployment rate somewhere in the double digits.

“We’re going to see economic data for the second quarter that’s worse than any data we’ve seen for the economy,” he said during a news conference. Continue reading.

Fed announces unlimited bond purchases in unprecedented move aimed at preventing an economic depression

Washington Post logo“It has become clear that our economy will face severe disruption,” the Fed said

In an effort to prevent the U.S. economy from spiraling into a depression, the Federal Reserve launched an unprecedented effort Monday to keep money flowing to companies, small businesses, households and even cities, who are facing an economic crisis that threatens to surpass the Great Recession.

With restaurants, airlines, hotels, auto manufacturers, and so many other parts of the economy in a standstill at once, there’s a massive need for short-term loans to help businesses survive until people can go out again. But just as this demand for loans is growing, investors are showing little appetite to buy up all this debt, preferring instead to hold on to cash.

The Fed is attempting to resolve this by buying unlimited amounts of U.S. Treasurys and mortgage-backed securities, an extraordinary backstop for lending markets that goes much further than what the central bank did in the 2008-09 crisis. Back then, the Fed injected nearly $4 trillion into the financial system over several years. Analysts say the Fed’s effort now could dwarf that in a matter of weeks, a testament to how much pain the coronavirus is causing the economy. Continue reading.

Fed cuts interest rates to zero percent amid coronavirus fallout

The Hill logoThe Federal Reserve on Sunday slashed interest rates to zero percent and announced it would purchase $700 billion in bonds and securities to stabilize financial markets and support the economy.

The Federal Open Market Committee (FOMC), the Fed’s monetary policymaking panel, announced Sunday it would cut its baseline interest rate range to 0 to 0.25 percent, drastically increase purchases of Treasury bonds and mortgage-backed securities, and take several other steps to allow banks, businesses and households to weather a sharp economic downturn.

“The actions we have announced today will help American families and businesses in our entire economy weather this difficult period and will foster a more vigorous return to normal once the disruptions from the current coronavirus abate,” said Federal Reserve Chairman Jerome Powell during a Sunday conference call with reporters. Continue reading.

Fed cuts interest rates by half a percentage point amid coronavirus fears

The Hill logoThe Federal Reserve on Tuesday cut interest rates amid concern about the potential economic toll of the coronavirus outbreak.

The Federal Open Market Committee (FOMC), which sets Fed interest rates, announced it would cut its baseline rate range by 0.5 percentage points to a 1 to 1.25 percent spread.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity,” the FOMC said Tuesday in a statement. “In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate.” Continue reading.

Fed Chair Powell warns Congress that $1 trillion budget deficits are unsustainable

Washington Post logoPowell also said it is ‘very likely’ the coronavirus will impact the U.S. economy, but it is too early to tell how much or for how long

Federal Reserve Board Chair Jerome H. Powell told Congress on Tuesday that now would be a good time to reduce the federal budget deficit, which is expected to top $1 trillion this year.

“Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn,” Powell said in testimony to the House Financial Services Committee.

In past recessions, the Fed has played a large role in reviving the economy by sharply cutting interest rates. But Powell has been warning lawmakers that the central bank won’t have much ammunition left to fight the next downturn because interest rates are so low (the benchmark rate is just below 1.75 percent, far below rates above 5 percent in the past). Continue reading.

Fed Chair Powell Isn’t The ‘Enemy’ — It’s Trump Himself

Jerome Powell is the bane of Donald Trump’s existence. Lately, it seems Trump would rather bash the Federal Reserve than eat his favorite fast food. Every other tweet from him accuses the central bank chairman of being a hopeless bungler.

On Friday, the president decided he had been far too mild in his criticism. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” he tweeted. This comes from someone who said of the Chinese leader in June, “I think we’re going to be strategic partners.”

Trump has grown increasingly frustrated that Powell will not do his bidding. The president asserted Wednesday, “The only problem we have is Jay Powell and the Fed.” Earlier in the week, he accused Powell of a “horrendous lack of vision.” A year ago, he was grousing about Powell for raising interest rates.

View the complete August 26 article by Steve Chapman on the National Memo website here.

If the U.S. economy is in good shape, why is the Federal Reserve cutting interest rates?

Washington Post logoThe Federal Reserve did something Wednesday that it hasn’t done in more than a decade: cut interest rates. The question on a lot of people’s minds is why.

Lowering interest rates, the Fed’s main way to boost the economy, is typically used in dire times, which it’s difficult to argue the United States is experiencing right now. Instead, top Fed officials are defending this as an “insurance cut” that’s akin to an immunization shot in the arm. They want to counteract the negative effects of President Trump’s trade war and prevent the United States from catching the same cold that Europe, China and elsewhere seem to have.

The Fed’s announced a quarter-point cut a widely expected move to lower the benchmark U.S. interest rate from about 2.5 percent down to just shy of 2.25 percent. But the Fed seldom does just one cut, which is why Trump, Wall Street and much of the world will be listening closely to Powell for signs of when another cut is likely.

View the complete July 31 article by Heather Long on The Washington Post website here.