The Federal Reserve chairman said Thursday that the Fed would provide essentially unlimited lending to support the economy as long as it is damaged by the viral outbreak.
In an interview on NBC's Today show, Jerome Powell said the central bank's efforts are focused on helping the economy recover quickly once the threat from the virus has passed.
Powell said the United States "may well" be in a recession already, but that it should get the coronavirus under control before getting back to work.
"The first order of business will be to get the spread of the virus under control, and then to resume economic activity," Powell said. "The virus is going to dictate the timetable here."
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Powell's comments contrast with those of President Donald Trump, who has suggested that he wants many Americans to get back to work as soon as Easter, less than three weeks away, and that efforts to slow the spread of the virus by shuttering large parts of the economy should not be worse than the disease itself.
The coronavirus pandemic is inflicting enormous economic damage in the United States, as quarantines close businesses, force workers to stay at home and create uncertainty that has spurred volatility in financial markets. Powell and his colleagues have been taking aggressive measures to shore up the economy, and he used his first major interview since the crisis began to underline what they are doing and why.
"You may well see significant rises in unemployment, significant declines in economic activity," Powell said, adding that eventually the economy would bounce back, helped by central bank policy. "We want to make that rebound as vigorous as possible."
His comments came shortly before data on jobless claims were released, underlining just how painful efforts to contain coronavirus have been for America's businesses and employees. Nearly 3.3 million people filed initial jobless claims last week compared with 281,000 the previous week -- the new total more than four times the record high.
While the economic fallout from coronavirus is sure to be severe, causing what many expect to be the biggest single-quarter drop in U.S. growth on record, Fed officials have said they are trying to put the economy into position so that it can snap back once the pandemic ends and the world returns to work.
To do so, central bankers want to ensure that U.S. households are well-placed to borrow and spend once the economy begins its recovery. They cut interest rates to near-zero over the course of two emergency meetings this month to make credit cheaper.
Officials are also trying to prevent the financial system from melting down during extreme market volatility. The goal is to keep financing easily available to businesses, which could help to tide them through the current dry spell. If too many companies fail and shed workers permanently, the downturn could become much more protracted.
The Fed committed to buying as many government bonds as necessary to soothe markets after ruptures appeared in Treasury and housing debt. It has intervened aggressively in the market for short-term loans between banks to keep that corner functioning smoothly, and it is using its emergency lending powers to backstop corporate bonds.
The aid legislation working its way through Congress will give the Fed money to ramp up those lending programs. The central bank had already announced facilities to help large corporations, small businesses and money market funds, backed by a Treasury Department fund containing $94 billion.
Now, it can scale up those programs with the Treasury agreeing to take initial losses on any loans that go sour.
Powell said the Fed's ability to lend is somewhat constrained by the amount of capital provided by the Treasury to offset any credit losses. He said the Fed can lend $10 for every $1 of cash that the Treasury provides.
The economic rescue bill approved by the Senate early Thursday includes $425 billion that the Treasury could use to backstop the Fed. That would allow the Fed to boost its lending programs to $4.25 trillion.
"When it comes to this lending we're not going to run out of ammunition," Powell said. "That doesn't happen."
Powell's appearance at a fraught economic moment recalled a similar one by Ben Bernanke, then the Fed chairman, during the depths of the recession a decade ago.
Bernanke appeared on 60 Minutes in March 2009, six months after Lehman Brothers filed for bankruptcy and seven months before the unemployment rate would peak at 10%. Fed chairmen never appeared in television interviews at the time, making it a momentous attempt to reassure the American people.
"I think we've averted that risk," Bernanke said when asked if the country was headed into a new Great Depression. "Now the problem is to get the thing working properly again."
Powell has done broadcast interviews previously, but never one so targeted at mass consumption. He brought words of reassurance if not certainty.
"Really the message is this: that this is a unique situation, it's not like a typical downturn," Powell said Thursday. "The Federal Reserve is working hard to support you now, and our policies will be very important when the recovery does come."
Information for this article was contributed by Jeanna Smialek of The New York Times and by Christopher Rugaber of The Associated Press.
Business on 03/27/2020