jerome h powell : coronavirus aid, relief, and economic security act testimony of mr jerome h powell, chair of the board of governors of the federal reserve system, before the committee on banking, housing, and urban affairs, us senate, washington, dc, 1 december 2020. * * * chairman crapo, ranking member brown, and other members of the committee, thank you for the opportunity to update you on our ongoing measures to address the hardship wrought by the pandemic. our public health professionals continue to deliver our most important response, and we remain grateful for their service. the federal reserve, along with others across government, is using its policies to help alleviate the economic burden. since the pandemic ’ s onset, we have taken forceful actions to provide relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy. economic activity has continued to recover from its depressed second - quarter level. the reopening of the economy led to a rapid rebound in activity, and real gross domestic product, or gdp, rose at an annual rate of 33 percent in the third quarter. in recent months, however, the pace of improvement has moderated. household spending on goods, especially durable goods, has been strong and has moved above its pre - pandemic level. in contrast, spending on services remains low largely because of ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality. the overall rebound in household spending is due, in part, to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals. in the labor market, more than half of the 22 million jobs that were lost in march and april have been regained, as many people were able to return to work. as with overall economic activity, the pace of improvement in the labor market has moderated. although we welcome this progress, we will not lose sight of the millions of americans who remain out of work. the economic downturn has not fallen equally on all americans, and those least able to shoulder the burden have been hardest hit. in particular, the high level of joblessness has been especially severe for lower - wage workers in the services sector, for women, and for african americans and hispanics. the economic dislocation has upended many lives and created great uncertainty about the future. as we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and

( a ) fixed exchange rate, ( b ) open capital account, and ( c ) independent monetary policy. the basic message of the ‘ trilemma ’ is that a central bank can achieve any two of the above - mentioned parameters, but not all the three. illustratively, if a country wants to have fixed exchange rate and independent monetary policy then it is difficult to maintain an open capital account. another important issue in monetary policy is the extent of transparency. central bankers all over the world are not exactly known for clarity in their language. nevertheless, the rational expectations school in macroeconomics holds that no policy can be successful over a period by “ fooling ” the economic agents. in this context, one may differentiate between genuine uncertainties about the future vis - a - vis not revealing the expected outcome of the policy. in fact, since the 1990s, there has been a preference all over the world to improve the transparency of monetary policy. in the context of improving transparency, the recent trend has been towards direct inflation targeting. adoption of explicit inflation targeting as the final goal of monetary policy involves the preparation of an inflation forecast, which, in a way, serves the purpose of both an intermediate target and final objective. the pre - requisites for inflation targeting include a considerable degree of operational autonomy or independence for central bank, flexible exchange rate conditions, well - developed financial markets and absence of fiscal dominance. in view of the growing complexities of macroeconomic management, several central banks including the european central bank have placed reliance on a broad set of economic and leading indicators rather than focusing exclusively on an intermediate target or a direct inflation target. the federal reserve has traditionally been following a more broad based approach to the conduct of monetary policy in the us. operating procedures : instruments and targets operating procedures refer to the day - to - day implementation of monetary policy by central banks through various instruments. these instruments can be broadly classified into direct and indirect instruments. typically, direct instruments include required cash and / or liquidity reserve ratios, directed credit and administered interest rates. cash reserve ratio ( crr ) determines the level of reserves ( central bank money or cash ) banks need to hold against their liabilities. similarly, liquidity reserve ratio requires banks to maintain a part of their liabilities in the form of liquid assets ( e. g., government securities ). credit and interest rate directives take the form of prescribed targets for allocation of credit to preferred sectors / industries and prescription of deposit and