Federal Reserve Chairman Jerome Powell said Wednesday (April 29) that the Fed will “not be in any hurry to withdraw [monetary stimulus] … until we’re quite confident that the economy is well on the road to recovery.” The chairman’s promise came in a virtual press conference held shortly after the central bank kept its benchmark federal-funds rate unchanged at 0 percent to 0.25 percent.
“Last month, we quickly lowered our policy interest rate to near zero,” Powell told reporters. “We stated then, and again today, that we expect to maintain interest rates at this level until we’re confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals,” he said.
“Without access to credit, families can be forced to cut back on necessities and could lose their homes,” he said. “Businesses can 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.”
Powell also noted that the Fed has been buying “large amounts” of Treasury and agency mortgage-backed securities. He said, “The markets for these securities play a critical role in the economy, and they came under great stress last month as the scale of economic disruption became clearer and as investors clamored for liquidity.”
In an earlier statement announcing plans to keep rates at essentially 0 percent, the central bank’s rate-setting Federal Open Market Committee (FOMC) said that “the disruptions to economic activity here and abroad have significantly affected financial conditions and have impaired the flow of credit to U.S. households and businesses.”
The FOMC said that in addition to keeping the Fed Funds rate low, the central bank will keep buying U.S. Treasury securities and agency residential- and commercial-backed mortgage securities in the necessary amounts to back “smooth market functioning.”
The Fed also noted in the statement that its Open Market Desk will keep providing sizable overnight and term repurchase agreement operations. “The committee will closely monitor market conditions and is prepared to adjust its plans as appropriate,” the FOMC said.
The latest moves come just days after the Federal Reserve Board abolished a limit on withdrawals and transfers of six per month from savings accounts. That move came as the country keeps adjusting to changes brought about by the coronavirus.
“The interim final rule allows depository institutions immediately to suspend enforcement of the six transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits at a time when financial events associated with the coronavirus pandemic have made such access more urgent,” the Fed said in announcing the move on April 24.