We're Not "Writing Blank Checks" - Jay Powell Claims "Nothing Fundamentally Wrong With Economy"

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by Tyler Durden
Thursday, Mar 26, 2020 - 8:00

Federal Reserve Chairman Jerome Powell was on NBC's Today show on Thursday morning, explaining how the COVID-19 pandemic has thrown the US economy into an unprecedented situation. 

Powell said the Fed still has room for monetary policy maneuverability, indicating "there can be a good rebound on the other side of this."

He said: "There's nothing fundamentally wrong with our economy, quite the contrary," adding that, "We may well be in a recession." 

"This is a unique situation," Powell said. "People are being asked to close their businesses and stay home from work. At a certain point, we will get the spread of the virus under control and confidence will return."

Powell said he has been listening to health experts about when the virus would clear; he expects economic activity will resume in the second half of 2020.

"We are not experts in pandemic... We would tend to listen to the experts. Dr. Fauci said something like the virus is going to set the timetable, and that sounds right to me," Powell said. "The first order of business will be to get the spread of the virus under control and then resume economic activity."

Powell said the latest round of stimulus is not a blank check for the US economy. He said the Fed would lend aggressively, standing ready to deploy credit wherever it is needed. He said the policies enacted by the Fed are to ensure that credit continues to flow through the economy. 

The Fed's actions to save the economy, he said, will not create more instabilities in the financial system, adding that monetary policy will not run out of ammunition when it comes to lending. 

He noted that every dollar from the US Treasury could support $10 in Fed loans. 

And it was only on Sunday night when Neel Kashkari told CBS' 60 Minutes that the Fed has an "infinite" amount of cash that it can deploy. 

"There's no end to our ability to do that." Kashkari told the 60 Minutes' host: "We're far from out of ammunition...your ATM is safe, your banks are safe. There's an infinite amount of cash at the Federal Reserve."

With no end in sight to the virus crisis in the US. Will the Fed have enough ammunition to shield the economy from a depression