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Jerome Powell President, Federal Reserve System (Fed, Federal Reserve)▶ Click here to enlarge
Jerome Powell, president of the Federal Reserve System (Fed, Federal Reserve) of the United States Central Bank, discussed the possibility of prolonging the recession.
It left room for additional monetary policy, but reaffirmed its negative position at the “negative base rate”.
“On the 13th (local time), in a video speech presented by the Petersen International Economic Research Institute (PIIE), think tank, the new coronavirus infection (Corona 19) was facing a more severe recession than World War II . “Width and speed are unprecedented.”
Because it was caused by a virus, he explained that his personality is different from that of the existing cyclical recession.
In addition, he said, “There is a serious risk of slowdown. A deep and prolonged shock can continue to impact economic production capacity.”
Diagnosing that the burden of household and business debt could reduce the economy for years to come, he repeated his willingness to make maximum use of monetary policy tools.
“In a recent Fed survey, 40% of US households whose annual income is less than $ 40,000 ($ 49 million) have been unemployed since February,” said Powell. It means that the unemployment crisis focused mainly on the low-income class.
He said that if Corona 19’s situation calms down, the economy will rebound considerably, but the pace may not be as fast as expected.
In particular, although he criticized that the Federal Reserve’s political response was timely and sufficient, he left room for further action, saying: “It may not be the last place.”
The federal government and Congress ordered active fiscal spending.
“Additional fiscal spending will be expensive, but it is worth it if we can avoid long-term economic losses and help a strong economic recovery,” Powell said. “This is for delegates elected to exercise fiscal and budgetary powers.” .
As the central bank limited to the role of “borrower” has demonstrated its maximum political capacity, it is interpreted to mean that more financial spending is needed to support direct subsidies.
As for the ‘negative interest rate,’ he said, “the Fed’s opinion has not changed.”
“I know there are some who support the policy,” said Powell. “But that is not what we are considering.”
“We have good policy tools,” he said, adding that there are mixed views on the effectiveness of negative interest rates.
It is interpreted that there is no need to debate the extreme prescription of ‘negative interest rate’ in a situation where the financial market stabilizes considerably as the standard interest rate drops to zero and radical QE policy is launched.
Previously on the US Treasury futures market. Water reflects negative interest rate expectations for a period of time, and President Donald Trump tweeted the day before, saying the US USA They should also accept gifts as other countries benefit from negative interest rates. Empowering market expectations.
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