Federal Reserve press conference, 2020-04-29 — Chair Jerome Powell

Question (Christopher Rugaber, Associated Press): Hi, Chair Powell. Chris Rugaber over at AP, thank you. I guess I had two questions. I wanted to start on the unemployment picture and nail down a little bit how you see—how you see things going from here. You did talk about potential loss of skills over time. So are you worried about structural changes in job markets that would keep unemployment high and, therefore, potentially beyond the ability of the Fed to do anything about, which is something that was debated, as you know, after the last recession, and then eventually, of course, the unemployment rate did go lower than people thought? Second question is just on the money from Treasury, the $454 billion. It sounds like you want to keep that in reserve for programs that have high demand, such as the Main Street program. Are you willing to use that to backstop, say, a program that is having more losses? I mean, you know, what’s your tolerance for loss among that $454 billion? Thank you.
Answer: So, in terms of the labor market, the—the risk to—of damage to people’s skills and their careers and their lives is a function of time to some extent. So the longer one is unemployed, the harder it gets, I think—and we’ve probably all seen this in our lives—the harder it is to get back into the workforce and get back to where you were, if you ever do get back to where you were. So, you know, longer and deeper downturns have had—have left more of a mark, generally, in that dimension with the labor force. And so that’s why—as I mentioned, that’s why the urgency in doing what we can to prevent that longer-run damage. It doesn’t have to be that way. We won’t be able to limit all of it, but we do have the tools to—to do what we can to—to keep people in touch with the labor force and working and also out of insolvency, too. It doesn’t seem fair that people should lose everything they have, including their homes, over this. So, nonetheless, there will be some of that. But we do have some tools to ameliorate that. In terms of the—so in terms of the—the money, you know, the $454 billion, it’s a couple things. First, the Treasury Secretary really has—has authority over that, right? And it stands in front of our losses. So, you know—but I do think we are—we’re clearly moving into areas where there is more risk than there has been in the past. And that’s okay. I think that’s what we’re supposed to do. This is—this is a very unusual time. And so—but in terms of the—of the way to think about that money, I think that’s really a question for the Treasury Department. You know, we are—we set up the facilities, and we work very, very closely and successfully and collaboratively with the Treasury on this, but that—that particular aspect of it falls more to the Secretary.

Question (Nancy Marshall-Genzer, Marketplace): Nancy Marshall-Genzer with Marketplace. Chair Powell, I’m wondering what you would say to savers who are hurt by very low interest rates and maybe going into investments maybe in the stock market that aren’t so great for them. And also, I’m wondering if you can give us any more of a clue as to how long you think we’re going to have interest rates near zero.
Answer: So we think that low interest rates affect the economy through a number of channels in a positive way. Lower interest rates support economic activity through channels that we—overall, through channels that we understand reasonably well. They make it cheaper to borrow, they make—they drive, you know, your costs of borrowing down. They do—they do raise asset prices, including the value of your home. If your saver owns a home or has a 401(k), your saver will benefit from that. But for people who are really, really just relying on their bank savings account earnings, this is—you know, that’s—that’s—you’re not going to benefit from low interest rates. But we—you know, we have to look out for the overall economy. Low interest rates support employment, they support economic activity, and those are our mandates. And I think for the overall good of the economy, low interest rates are a good thing. And that’s not to say they’re good for every single person, but that shouldn’t stop us from doing what we think is—is good for the whole. In terms of how low, I really don’t want to speculate. You know, we will turn to questions like that soon enough. But the—in terms of how long we’ll stay and under what conditions we’ll stay at the effective lower bound, those are just exactly the things we’re thinking about. Right now we like the place we are. We’ve said that we’ll keep our rates where they are until we’re confident that the economy has weathered the effects of the outbreak and is on track to achieve our—our goals. So that’s where we are. We’re leaving—we’re not changing that guidance today, you know, but it’ll be—that means we’re going to be very patient. That means we’re—we’re not going to be in any hurry to move rates up.