trillion of agency mbs and about $ 175 billion of agency debt at the end of this month. the federal reserve ’ s purchases have had the effect of leaving the banking system highly liquid, with u. s. banks now holding more than $ 1. 1 trillion of reserves with federal reserve banks. a range of evidence suggests that these purchases and the associated creation of bank reserves have helped improve conditions in mortgage markets and other private credit markets and put downward pressure on longer - term private borrowing rates and spreads. at its meeting last week, the fomc maintained its target range for the federal funds rate at 0 to 1 / 4 percent and indicated that it continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. in due course, however, as the expansion matures, the federal reserve will need to begin to tighten monetary conditions to prevent the development of inflationary pressures. the federal reserve has a number of tools that will enable it to firm the stance of policy at the appropriate time. most importantly, in october 2008 the congress gave the federal reserve statutory authority to pay interest on balances that banks hold at the federal reserve banks. by increasing the interest rate on banks ’ reserves, the federal reserve will be able to put significant upward pressure on all short - term interest rates, as banks will not supply shortterm funds to the money markets at rates significantly below what they can earn by holding reserves at the federal reserve banks. actual and prospective increases in short - term interest rates will be reflected in turn in higher longer - term interest rates and in tighter financial conditions more generally. the federal reserve has also been developing a number of additional tools it will be able to use to reduce the large quantity of reserves currently held by the banking system. reducing the quantity of reserves will lower the net supply of funds to the money markets, which will improve the federal reserve ’ s control of financial conditions by leading to a tighter relationship between the interest rate paid on reserves and other short - term interest rates. notably, to build the capability to drain large quantities of reserves, the federal reserve has been working to expand its range of counterparties for reverse repurchase operations beyond the primary dealers and to develop the infrastructure necessary to use agency mbs as collateral in such transactions. 3 in this regard, the federal reserve recently announced primary dealers are broker - dealers that trade in

for release on delivery 8 : 50 a. m. edt ( 1 : 50 p. m. gmt ) october 21, 2020 achieving a broad - based and inclusive recovery remarks by lael brainard member board of governors of the federal reserve system at “ post - covid — policy challenges for the global economy ” society of professional economists annual online conference ( via webcast ) october 21, 2020 i want to express my appreciation to kevin daly for inviting me to participate in the society of professional economists annual online conference. 1 the u. s. economy saw a strong initial bounceback from the depths of the covid - 19 ( coronavirus disease 2019 ) crisis, aided by significant targeted support. the recovery remains highly uncertain and highly uneven — with certain sectors and groups experiencing substantial hardship. these disparities risk holding back the recovery. the federal reserve is committed to providing sustained accommodation to achieve a broadbased recovery. further targeted fiscal support will be needed alongside accommodative monetary policy to turn this k - shaped recovery into a broad - based and inclusive recovery. k - shaped recovery? targeted interventions, along with adaptations in the behavior of households and businesses, have enabled economic activity to recover. all told, after an unprecedented contraction in the first half of the year, u. s. gross domestic product appears likely to have reversed more than one - half of that decline in the third quarter. but within the overall improvement, some groups and sectors continue to see depressed employment, income, and revenues. sustained disparities can hold back the recovery and lead to worse overall outcomes. over the past month, the federal reserve board has held three meetings with community groups, mission - oriented lenders, and representatives of frontline workers to hear about these disparities and their implications for the recovery. i am grateful to kurt lewis for his assistance in preparing this text. these remarks represent my own views, which do not necessarily represent those of the federal reserve board or the federal open market committee. - 2overall, total consumer expenditures in the united states have recovered about three - fourths of their spring decline through august. interest - sensitive sectors such as residential real estate and autos have rebounded strongly — a welcome reminder of the power of monetary accommodation, especially when coupled with necessary fiscal support. consumer spending on goods posted robust gains over the summer, and august levels exceeded those in january. in sharp contrast, however, consumer spending on services through august has recovered only about 60 percent