Fed Is ‘Not Going to Run Out of Ammunition,’ Powell Vows

Federal Reserve Chairman Jerome Powell said the central bank will maintain its muscular efforts to support the flow of credit in the U.S. economy as Americans hunker down from the coronavirus pandemic.

“We will keep doing that aggressively and forthrightly, as we have been,” Powell said Thursday in a Fed chief’s first-ever interview on NBC’s “Today” show. “When it comes to this lending we’re not going to run out of ammunition. That doesn’t happen.”

Over the past three weeks, the U.S. central bank has introduced an unprecedented series of measures, pushing it deep into uncharted territory as it seeks to cushion the blow of the coronavirus on financial markets and the U.S. economy.

The steps include massive bond purchases, emergency facilities to bolster credit markets, actions with foreign central banks to ease the supply of dollars worldwide, and programs for lending directly to American businesses.

“We know that economic activity will decline probably substantially in the second quarter,” Powell said, adding that people were intentionally withdrawing from normal life to protect their health.

That might mean the U.S. entering a recession, the Fed chief conceded, but argued it would be temporary.

“This is a unique situation, this is not a typical downturn,” Powell said. “At a certain point we will get the spread of the virus under control and at that time confidence will return. Businesses will reopen again, people will come back to work.”

His NBC interviewer, Savannah Guthrie, later confirmed in a tweet that it was the first time a Fed chair had ever appeared on the Today show in its 68-year history, in a emblematic sign of the extraordinary times facing the country.

Powell emphasized that note of optimism, saying, “You may well see significant rises in unemployment, significant declines in economic activity, but there can also be a good rebound on the other side of that.”

Powell appeared to distance himself from President Donald Trump’s position that the U.S. should perhaps seek a quick reopening of the economy because the clampdown on normal activity may cause more harm than the virus.

‘Listen to the Experts’

“We would tend to listen to the experts. Dr. Fauci said something like, the virus is going to set the timetable,” he said, referring to Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. “That sounds right to me. The sooner we get the spread of the virus under control, people will regain confidence.”

The Fed chief also pointed to the $2 trillion aid bill approved last night in the U.S. Senate that’s on its way to the House of Representatives today.

“This bill that’s just passed is going to try to provide relief and stability,” he said. The legislation contains additional funds for the U.S. Treasury that can be used to boost the Fed’s lending firepower, he said, while the central bank’s actions will also lay the groundwork for a speedy economic recovery.

Boost Recovery

“The Federal Reserve is working hard to support you now,” he said. “Our policies will be very important when the recovery does come to make that recovery as strong as possible.”

Michael Gapen, chief U.S. economist at Barclays Plc in New York, said looking past the second quarter was the right way to think about the challenge. “We can’t avoid taking an economic hit,” he said. “We can prevent some of the nastier second-round of effects like large-scale layoffs or a credit crunch.”

The appearance on the popular morning show as many Americans are stuck in their homes marks the Fed chief’s first public remarks since he held an emergency Sunday evening press briefing by teleconference on March 15 to announce the central bank had slashed interest rates to almost zero.

Public communication for Fed chairs has for decades been carefully choreographed, given the weight that even subtle signals can carry for investors.

Powell gave only one other TV interview as chair, on CBS’s “60 Minutes.” Ben Bernanke, who led the Fed during the financial crisis, made his own rare appearance on “60 Minutes” in March 2009. Former Fed Chairman Alan Greenspan curbed on-the-record interviews with the press after his 1987 appearance on ABC’s “This Week with David Brinkley” caused stocks to drop.

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