Jerome Powell Fed Press Conference Transcript November 5: Calls for More Economic Stimulus

Jerome Powell: (06:10) Good afternoon. At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us, maximum employment and price stability. Since the beginning of the pandemic, 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. Today, my colleagues on the Federal Open Market Committee and I reaffirmed our commitment to support the economy in this challenging time. Jerome Powell: (06:41) 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 GDP rose at an annual rate of 33% 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 due to ongoing weakness in sectors that typically require people to gather closely, including travel and hospitality. Jerome Powell: (07:22) The overall rebound in household spending owes in part to federal stimulus payments and expanded unemployment benefits, which provided essential support to many families and individuals. The housing sector has fully recovered from the downturn, supported in part by low mortgage interest rates. Business investment has also picked up. Even so, overall economic activity remains well below its level before the pandemic, and the path ahead remains highly uncertain. Jerome Powell: (07:54) In the labor market, roughly 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. The unemployment rate declined over the past five months, but remained elevated at 7.9% as of September. Jerome Powell: (08:17) 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. Jerome Powell: (08:51) The pandemic has also left a significant imprint on inflation. Following large declines in the spring, consumer prices picked up over the summer, in part reflecting a rise in durable goods prices. However, for those sectors that have been most effected by the pandemic, prices remain particularly soft. Overall, on a 12-month basis, inflation remains below our 2% longer run objective. Jerome Powell: (09:16) As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend in large part on the success of efforts to keep the virus in check. The recent rise in new COVID-19 cases, both here in the United States and abroad, is particularly concerning. All of us have a role to play in our nation's response to the pandemic. Following the advice of public health professionals to keep appropriate social distances and to wear masks in public will help get the economy back to full strength. A full economic recovery is unlikely until people are confident that it's safe to re-engage in a broad range of activities. The Federal Reserve's response to this crisis has been guided by our mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system. As noted in our statement on longer run goals in monetary policy strategy, we view maximum employment as a broad-based and inclusive goal. Our ability to achieve maximum employment in the years ahead depends importantly on having longer-term inflation expectations well anchored at 2%. Jerome Powell: (10:33) As we said in September and again today, with inflation running persistently below 2%, we will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well-anchored at 2%. We expect to maintain an accommodative stance of monetary policy until these employment and inflation outcomes are achieved. With regard to interest rates, we continue to expect that it will be appropriate to maintain the current zero to one quarter percent target range for the federal funds rate until labor market conditions have reached levels consistent with the committee's assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time. Jerome Powell: (11:22) In addition, over coming months, we will continue to increase our holdings of treasury securities and agency mortgage-backed securities at least at the current pace. These asset purchases are intended to sustain smooth market functioning and help foster accommodated financial conditions, thereby supporting the flow of credit to households and businesses. At this meeting, my colleagues and I discussed our asset purchases and the role they are playing in supporting the recovery. At the current pace, our holdings of securities are rising at a substantial rate of $120 billion per month, $80 billion per month of treasuries and $40 billion per month of agency MBS. Jerome Powell: (12:04) We believe these purchases, along with the very large purchases made to preserve financial stability in the depths of the crisis, have materially eased financial conditions and are providing substantial support to the economy. Looking ahead, we will continue to monitor developments and assess how our ongoing asset purchases can best support our maximum employment and price stability objectives, as well as market functioning and financial stability. The Federal Reserve has also been taking broad and forceful actions to more directly support the flow of credit in the economy for households, for businesses large and small, and for state and local governments. Preserving the flow of credit is essential for mitigating damage to the economy and promoting a robust recovery. Many of our programs rely on emergency lending powers that require the support of the Treasury Department and are available only in very unusual circumstances, such as those we find ourselves in today. These programs serve as a backstop to key credit markets and have helped to restore the flow of credit from private lenders through normal channels. Jerome Powell: (13:13) We have deployed these lending powers to an unprecedented extent, enabled in large part by financial backing and support from Congress and the Treasury. When the time comes, after the crisis has passed, we will put these emergency tools back in the toolbox. As I've emphasized before, these are lending powers, not spending powers. The fed cannot grant money to particular beneficiaries. We can only create programs or facilities with broad-based eligibility to make loans to solvent entities, with the expectation that the loans will be repaid. Many borrowers are benefiting from these programs, as is the overall economy. But for many others, getting a loan that may be difficult to repay may not be the answer. In these cases, direct fiscal support may be needed. Elected officials have the power to tax and spend and to make decisions about where we as a society should direct our collective resources. Jerome Powell: (14:10) The fiscal policy actions that have been taken thus far have made a critical difference to families, businesses, and communities across the country. Even so, the current economic downturn is the most severe in our lifetimes. It will take a while to get back to the levels of economic activity and employment that prevailed at the beginning of this year, and it may take continued support from both monetary and fiscal policy to achieve that. Jerome Powell: (14:37) I'd like to mention a couple of changes that we plan on making to our summary of economic projections beginning in December. First, we will release the entire package of SEP materials at the same time that the FOMC statement comes out. Previously, some of these materials were released three weeks after the meeting as part of the minutes. This step will make more information available at the time of our policy announcements, including the distributions- Jerome Powell: (15:03) And available at the time of our policy announcements, including the distributions of forecasts and how participants judge the uncertainty and risks that attend their projections. Second, we will add two new graphs that show how the balance of participant's assessments of uncertainty and risks have evolved over time. These changes to the SEP will provide a timely perspective on the risks and uncertainties that surround the modal or baseline projections, thereby highlighting some of the risk management considerations that are relevant for monetary policy. Jerome Powell: (15:32) To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible. Thank you. I look forward to your questions. Rachel Siegel: (16:00) Hi, Chair Powell. It's Rachel Siegel from the Washington Post. Thanks very much for taking my question. I'm wondering if you can speak specifically about what indicators you're seeing that suggests the pace of improvement has moderated including in the labor market and how correlated those indicators are to the recent rise in COVID cases that we've seen going into flu season. Thank you. Jerome Powell: (16:23) Sure. So of course, let's start with February. In February, we had an economy that was performing well, then the pandemic hit and we had a record decline in activity in March and April. And then we had a record bounce back in May and June. And so as I think would have been expected and was expected, the pace of improvement from May and June has now moderated. So it's not unexpected. And I think if you look at just about anything, for example, the payroll readings, the payroll job gains in May and June were just outsized. And that there are certainly still very large, but the pace of improvement has moderated. That's the case for all different measures in the labor market. Another would be claims, just about all the data showed a big bounce back, but then as you would expect, when you sort of had a lot of people go back to work at once, the pace will moderate. Same thing with economic activity, most forecasts call for still a significant growth in the fourth quarter, but not at the 33% annualized pace that we had in the third quarter. Jerome Powell: (17:31) So in a sense that would be as expected. We have been concerned that the downside risks though, are prevalent now, which are really the risk of the further spread of the disease. And also the risk that households will run through the savings they've managed to accumulate on their balance sheet. And that that could weigh on activity. But what we see up to the present really is continued growth, continued expansion, but at gradually moderating pace. Rachel Siegel: (18:07) Thank you. Speaker 1: (18:07) Marty Kreisinger. Associated Press. Marty Kreisinger: (18:11) Thank you. Could you talk a little bit about where you think the stimulus package they just being debated in Congress is, and how severe a threat that could be to the economy if it does not get passed say before January? Jerome Powell: (18:32) So it is obviously it's for Congress to decide the timing, size, and components for the fiscal support for the economy. And I will say that the support provided by the CARES Act was absolutely essential in supporting the recovery that we've seen so far, which has generally exceeded expectations. And I do think it's likely that further support is likely to be needed for monetary policy and fiscal policy. I just mentioned the two risks that I think we face, and those would be well addressed through more fiscal policy. One is the further spread of the virus and the other is the lapsing of the CARES Act benefits and the savings on people's balance sheets that will dwindle. But I think it's appropriate for us not to try to prescribe for Congress exactly what they should do or what the timing of it should be, or what the size of it should be and leave it at that. Speaker 1: (19:26) Nick Timiraos. Tim Timiraos: (19:32) Thanks Chair Powell. Hello, Nick Timiraos at the Wall Street Journal. To follow on Marty's question, you really have been saying since April that more is needed on the fiscal policy front, and yet we don't seem to be that much closer than we were in the spring or the summer to additional spending. Two questions. Would the lack of fiscal support compel the Fed to provide additional accommodation? And are you and your colleagues being more vocal about the need for fiscal support because the capacity for monetary policy to support growth is diminished here given the low level of short and long-term rates. Thank you. Jerome Powell: (20:11) So in your first question, we'll take into account all external factors and do what we think we need to do with the tools that we have to pursue our goals. That's what we will do. And I've said it on a couple of occasions that that will go better and move more quickly if we have a broad set of policies from across the government. And we've said this from the very beginning, it's really first and foremost healthcare policy getting the spread of the virus under control and working on therapeutics and vaccines and that kind of thing, so that those are absolutely critical to the economy. Those are important as well as health policies, they're going to be critical to the economy. Fiscal policy can do what we can, which is to replace lost incomes for people who are out of through no fault of their own. Jerome Powell: (20:58) And then what we can do is we can obviously support financial stability through our lending programs and we can support demand through interest rates and asset purchases and that sort of thing. So we're going to take the economy as it comes, including all external factors. And so I think all of us live through the experience of the years after the global financial crisis and for a number of years there in the middle of the recovery fiscal policy was pretty tight. And I think I just would say that I think we'll have a stronger recovery, if we can just get at least some more fiscal support when it's appropriate and the size Congress thinks it's appropriate. I do think that that will likely, and by the way, you see a lot of discussion on both sides of the aisle, on both sides of the Hill that suggests generally that there will be something. Speaker 1: (22:02) Thank you, Steve Liesman, CNBC. Steve Liesman: (22:06) Thank you. Mr. Chairman, I'd also to follow up on sort of what Nick was talking about. Two questions about quantitative easing. The first is if the market is functioning better as you and other Fed officials have said, and QE right now is designed for small and mid market functioning, why haven't you reduced QE that you're doing if the market is functioning better already? The second question I have is, what good for the broader economy would additional QE do at this point, given that interest rates are already low and don't seem to be rising even up above 1%. Thank you. Jerome Powell: (22:43) So on the first question, our asset purchases are serving both purposes of financial market function and support for economic activity. And that's really been true. I think in the very beginning of the crisis, the main focus was obviously financial market function, particularly in some of the major markets. But after that period, we've understood all along that our purchases are also supporting economic activity and that's important and that need hasn't dwindled at all. So, we haven't looked at reducing purchases. So in terms of what they can do, first, I would just say the purchases that we have in place are providing strong support to economic activity still, and by the way, they're sustaining the gains we've made in financial stability. We don't take anything for granted, we don't expect that things will deteriorate, but nonetheless, we have a habit of keeping things in place for a while. So we're not taking our gains and financial market function for granted. Although, admittedly been they've been very large. Jerome Powell: (23:57) So the asset purchases are just another very important piece of the accommodative policy stance that we have. And as you know, that these were buying 120 billion a month, that's 1.44 trillion, if I remember my times tables. And it's just providing a lot of support for economic activity. And by the way, removing just about the same amount of duration risk from private hands as QE3 did. So this is a big program and it's doing a lot of good. And we also, today we had a full discussion of the options around the asset purchase program. And we understand the ways in which we can adjust the parameters of it to deliver more accommodation. If it turns out to be appropriate right now, we think that this very large effective program is delivering about the right amount of accommodation and support for the markets and so it continues. Speaker 1: (25:00) Thank you, Craig Torres, Bloomberg. Craig Torres: (25:06) Hi, Chair Powell. First it's [inaudible 00:10:09]. Chair Powell, what is the risk that we come out of this with lower productivity, weaker labor force attachment, slower growth, and important for your tools, Chair Powell, a cycle of lower real interest rates? And if you think this type of scarring is a risk, and I'm wondering what stopping the Federal Reserve from having a more explicit dialogue with Congress about the particular types of fiscal support we might need to avoid this outcome to make sure that you push away from the zero boundary or that the economy does when we exit this. Thanks. Jerome Powell: (25:52) Thank you. You laid out nicely the risks of damage to the supply side of the economy or scarring as you put it. And we've been talking about those since the very beginning of the pandemic. The risk is that, for example, people are out of the labor force for an extended period of time. They lose their attachment to the labor force, and it's harder to get back your skills atrophy. It's harder to get back in. And the record is if you don't get back in fairly quickly, it can be harder to get back in. And that holds down the whole economy and, by the way, it also it places enormous burdens on individuals who may have this happen to them at an important stage in their career. So it's important. And so that is one of the reasons why our response was so strong and so urgent at the beginning, and why we've called this set of risks out. Jerome Powell: (26:42) I don't know how we could be much more vocal about it than we have been. Fortunately, the economic recovery has exceeded certainly the downside cases that we were very concerned about, and even sort of exceeded the baseline expectations. Now that's so far, we are a long way from our goals. And we're sort of halfway there on the labor market recovery at best. And there are parts of the economy where it's going to be hard until there's a vaccine, parts of the economy. The supply side damage, that's sort of the third thing that we talk about. At the beginning, it was to provide relief and comfort. Then the second part was to provide support expansion when it came. And the third was to avoid longer run damage to the economy. And that's all of these things. Jerome Powell: (27:34) I think we have been vocal, we'll try to continue to do that. And that's again, that goes to keeping this episode as short as it can be and avoiding unnecessary business bankruptcies, unnecessary household bankruptcies, and unnecessary long-term stays of unemployment or supporting people through them so that they can maintain their financial footing and their lives, and be able to go back to work in a productive way. It's very important. There is a real threat here of those things and we're trying to do everything we can to minimize that threat. Speaker 2: (28:32) [inaudible 00:28:32] and whether you anticipate any consequences, if they have not extended? Jerome Powell: (28:38) Yes. Thanks. So first let me say, we do think that the facilities have generally served their purposes well, particularly in supporting the flow of credit, particularly acting as backstops to private markets. So overall, we think that the programs that have gone well. In terms of the extension where we are just now turning to that question. We've had a lot of things to work our way through. Right now we're just in the process of turning to that question. And of course have not made any decisions and in terms of the process, this is a decision that, of course we have to make and will make jointly with the Treasury Department. Speaker 1: (29:14) Thank you, David Gura. David Gura: (29:20) [inaudible 00:29:20] chief economist. Gita Gopinath wrote an op-ed piece this week in which she said unequivocally, we're in a global liquidity trap and talked about the limits of monetary policy right now. She said, fiscal policy will need to be the main game in town. And it's been a busy week. I don't know if you were able to pick up the pink paper and read that piece, but she does say 97% of advanced economies have rates below 1%. And I just wonder if you'd agree with her in principle, that we are in a global liquidity trap and what the consequences of that would be. We talked a lot about fiscal policy here domestically, and she talks about the need for sort of a global cohesive approach to fiscal policy. My second question is you talk about how you follow the epidemiology. You're looking- David Gura: (30:02) You follow the epidemiology. You're looking [inaudible 00:30:10] and I wanted to ask you about how you look to the [inaudible 00:30:14] laying out what the ECB plans to do, as you lent an ear to what she had to say, the dire warnings that she was making this morning, as she looks at the situation that Europe's in. What can you and your colleagues learn about the second wave or the third wave that you've talked about and we've all feared when it comes to a policy response? Jerome Powell: (30:32) Okay, thanks. So two questions. First, I take the sense of your first question to be as monetary policy out of power or out of ammo and the answer to that would be, no, I don't think that. I think that we are strongly committed to using these powerful tools that we have to support the economy during this difficult time for as long as needed. And no one should have any doubt about that. And we do not doubt the power of the things that we've already done or the things that we may do in the future. I do think there's more that can be done. And I also think if you look at the stock of assets that we've bought, if you look at the facilities and the way we've been able to keep financial conditions accommodative, I think we've been able to do a lot of things that are providing very strong support for the economy. And we're going to to keep at that. Jerome Powell: (31:25) I've said, we've said from the very beginning though, that this particular situation we find ourselves in is one where there is a sudden loss of income on the part of millions and tens of millions of people. It's not so much a typical recession where demand weakens, the Fed cuts interest rates, interest rates stimulate demand and the economy recovers. It's a sudden shock where tens of millions of people are out of work. And the fiscal response was frankly, I think, very good and very robust in the United States. And it's certainly one of the main reasons why the recovery has been as good as it's been so far. So I do think fiscal policy's absolutely essential here. Stimulating aggregate demand is one thing, but where there's a part of the economy, it kind of will be resistant to that. You also need fiscal policy. And of course you need healthcare policy too. Jerome Powell: (32:17) I didn't see Madame Lagarde's comments this morning, but I took the sense of that question to be, the spread of the disease in Europe and what do we think about that? Yeah. So, as I mentioned in my opening remarks, it's a concern. We have a widespread spike in cases across the country, more in some regions than others. And even if we don't have, and I don't expect that we would, sort of government imposed restrictions, it does seem likely though that people who have maybe begun to engage in activities, that they hadn't in flying, staying in a hotel, going to restaurants, going to bars and things like that, that they may pull back in a situation where suddenly the cases are everywhere in your city, your state, your community. Jerome Powell: (33:07) So I do think that, that's a risk that we have as we go into the fall now and the cases spike. That could weigh on economic activity. One would expect that it would. We thought the same thing in fairness about the wave we had this summer in the South and the West and the economy seemed to move right through that. This one seems to be larger and more widespread. In any case, it's a risk is what I would characterize it. I would characterize it as a risk as I did in my comments. David Gura: (33:35) Can I ask a quick follow up just about the passions of the Fed, Chairman, we've listened to your rhetoric over the course of this pandemic, and you talked about what the Fed was doing, the reasons for doing it at first, you talked about the balance between monetary and fiscal policy, I think in your recent comments and in Governor Brainard's comments certainly, there has been more passion yet about the need for Congress to be more... I know you're limited in what you can say or the degree to which you'd want to advise Congress, but a simple question. Do you feel that you're being heard as you look at the prospects for this economy and potential need for more fiscal policy, do you feel like those who were crafting that policy or could be, are listening to you and have a firm grasp of what you are saying about how that might affect or improve the economy going forward? Jerome Powell: (34:18) Let me say, in the first instance, our main focus is on doing our job. And that is really what we're focused on is using the tools that Congress has given us and the assignment they've given us. And I think that is the thing that we think about night and day. I just know, from the experience of the last cycle, it helps to have the whole government working on these things. And this one is particularly that way. I don't want to say whether I feel like I'm being heard or not, but sure. I think there are plenty of people on Capitol Hill who, on both sides of the aisle, on both sides of the Hill, who see a need for further fiscal action and understand perfectly why that might be the case. David Gura: (34:58) Thank you. Thank you. Speaker 3: (35:02) Thank you, Edward Lawrence, Fox Business. Edward Lawrence: (35:06) Thank you, Mr. Chairman for taking the question. So what would cause the Federal Reserve to shift more of its asset purchases towards the long-term securities and treasuries and change the amount of spending there also? As a second point onto that, if there's no fiscal stimulus package, would that then trigger buying of more long-term assets or change the asset purchases? Jerome Powell: (35:30) I don't really have a specific hypothetical I would put to you. I would just say that we understand that there are a number of parameters that we have where we can shift the composition, the duration, the size, the life cycle of the program. All of those things are available to us as ways to deliver more accommodation, if we think that's appropriate. Right now, we like the amount of accommodation the program is delivering. It will just depend on the facts and circumstances. We may reach a view at some point that we need to do more on that front. Today's meeting was about analyzing, one of the things it was about, was about analyzing the various ways and having a good discussion about how to think about those various parameters, which I thought was quite a useful discussion. Speaker 3: (36:24) Thank you. Victoria Guida. Victoria Guida: (36:31) Hi Chair Powell. Thanks for taking the question, I wanted to ask about climate change. FHFA director Mark Calabria recently said that financial regulators need to account for financial change, climate change I'm sorry. What are you all thinking of doing on that front, beyond what you're already doing? And do you have any plans for joining the network for Greening the Financial System? Jerome Powell: (36:53) Yes, so I do think that the public will expect and has every right to expect that in our oversight of the financial system, we will account for all material risks and try to protect the economy and the public from those risks. Climate change is one of those risks. It's a relatively, the science and art of incorporating climate change into our thinking about financial regulation is relatively new, as you know. And we are very actively in the early stages of this, getting up to speed, working with our central bank colleagues and other colleagues around the world to try to think about how this can be part of our framework. Jerome Powell: (37:39) And we're watching what other countries are doing. We're active participants, as you know, in the CG, no, the Greening the Financial System. And we haven't actually formally joined, but we're there, we're in the working groups and we're doing all of that. So we're very much working with and monitoring the things other central banks are doing. You hear there's lots of research going on at the various reserve banks and here at the board and trying to understand this, these tend to be longer term risks, but of course the longer-term does arrive over time. And we take it as our obligation to understand these risks and incorporate them into the way we supervise and think about the overall financial system and the economy. Speaker 3: (38:27) Thank you, Howard Schneider Reuters. Howard Schneider: (38:34) [inaudible 00:38:34] From Gina's question. Have you gotten a commitment from Secretary Mnuchin to extend the 13(3) facilities if you decide it's necessary and big concern what a lame duck Trump administration might do in that regard? And then more broadly on the state of the economy, are you comfortable now that the tail risk for worst case outcomes has been kind of swept aside and minimized at this point? Are we down, in other words, to kind of household level problems among a large set of households, perhaps, but that the financial crisis, a double dip recession sort of scenario are off the table? Jerome Powell: (39:13) So on your first question, we really are just turning this issue now, and we have not made any decisions. We are just getting started on it. And it's a decision that we'll make jointly with the Treasury Department. And that's really all I can say today. That's all I have for you on that today. In terms of the tail risks, I think clearly the tail risks that we were worried about have subsided, we were worried about very negative potential outcomes, but that's what is to be expected of us, is to think about how things can go wrong, as well as the way things can go right. But we do make policy from a risk management standpoint. We don't just look at the most likely case. We ask, how do you make policy in light of the risks? Jerome Powell: (39:56) And often it's downside risks in a situation like this. I would not say that anybody's feeling comfortable about this though. We've gotten through the first five, six months of the expansion better than expected, but we do see in Europe, look what's happening in Europe. Look what's happening here. Another spike in cases as the cold weather arrives and people are inside more. So I think we have to be humble about where we are relative to this disease. It hasn't gone away. Clearly therapeutics are advancing, research on vaccines that are advancing. Death rates are way down, hospitalization rates are lower now, so we're learning. But we're very far from saying that we think we've got this and eliminate the tail risks. But I think clearly the tail risks have diminished since, at least our perception of them has diminished since earlier in the year. Speaker 3: (40:59) Thank you, Scott Horsley, NPR. Scott Horsley: (41:08) Thank you, Mr. Chairman. Earlier this summer, I know that you formed a task force distribution of coins around the system. I wonder if you can give us an update on how that's going, I know there's been some public relations effort. I think October was get the coins moving months. Has that problem subsided? Jerome Powell: (41:28) Let me say why it's such an important... In a world where so many payments are made digitally and all that. Coins and currency are very important for the relatively low income people. And so it's a really incredibly important part of the payment system and we do pay a lot of attention to it. And I actually just caught up this morning with the person who heads that operation here, who says that yeah, things have really gotten significantly better on the coin front. So we worked very hard to increase the supply of coins and even more than that, the distribution of coins around the system and are happy to say that situation is well on the way to normalizing itself. So very pleased to report that. Speaker 3: (42:20) Thank you, James Politi, FT. James Politi: (42:25) Thanks very much for the question Chair Powell, we've just had a presidential election here in the United States. We still don't know who the winner is. Are you concerned that projected tensions or uncertainty over the outcome of the presidential election pose a risk to the economic outlook or trigger market turmoil? And has the Fed had any discussions either internally or with the Treasury Department about responding to that, should it happen? Jerome Powell: (42:54) Thanks. So I'm very- Jerome Powell: (42:56) (silence). Jerome Powell: (43:15) For the American people using our tools to support the economy during this difficult time. You ask if we had discussions, I would say, the meeting we just finished. For example, what we do is we talk about the economy and markets domestically and around the world, we hear reports on how households and businesses are doing. We talk about risks to the outlook. We talk about what the right policy response might be, and the election it comes up now and again, but it is not at all a central focus of the meeting, not at all. So I just leave it at that again, very reluctant to get into anything more than that. Thanks. Speaker 3: (44:07) Thank you. Anneken, CNN. Anneken Tappe: (44:08) Thank you for taking my question. Chairman Powell, can you tell us a little bit more about why the minimum loans [inaudible 00:44:15] under the Main Street facility was produced last week and why that was done now, rather than earlier, seeing that small businesses are still clearly still struggling to make the change necessary? Jerome Powell: (44:25) Sure, so we have had very little demand below a million dollars in loans. And part of that just is that the fee structure is what it is and that's the compensation that the banks get. And there's a certain amount of work that they have to do to get into the loan program and to document the loans that they make. Because these are loans that go on their balance sheet, they keep 5%. So they actually have to underwrite the credit and we're relying on them to some extent for doing that. And so we were reluctant, we moved the minimum down to 250,000 and we were reluctant. Jerome Powell: (45:03) We were reluctant. We moved the minimum down to 250,000, and we were reluctant to go below that, but we heard over and over again that it would be great if we could reduce it to 100,000. And we've been saying we'd have to redesign the program, and I got the question in an oversight hearing a month or so ago with the secretary and said that. Then I went back to the office and thought, "Okay, so what would that look like if we were to redesign the program in a way... It's the least thing we could do to redesign the program so that we could move to a lower level." And basically, we concluded we could just change the fee structure to create incentives for that. So we did that. We try to be responsive. Jerome Powell: (45:37) We want qualifying businesses to be able to borrow, and we'll see how much demand will come. With these programs, why didn't we do it right away? There's more work than one might, certainly than I, imagined in setting up one of these facilities. And you just try to get it out there and get it working and not try to do everything before you start it, because you'll never start it if you do that. Then you get it started and you make changes, and we've been willing to make changes. That's the most recent set of ones that we've done. And again, we hope that it will help some companies. And I guess we'll find out. Speaker 4: (46:24) Thank you. Heather? Craig Torres: (46:31) Heather Scott this time, right? Thank you [Chair Powell 00:00:46:35] for taking the question. You say that you're not out of ammo. So I'm wondering then what is the next [tool 00:00:46:40] you expect to be able to roll out? Would you consider some sort of program for state and local governments that are facing budgetary pressures? Jerome Powell: (46:58) When I say we're not out of ammo, I'm looking at a couple of our tools, mainly, as I mentioned, the asset purchase program. There's a number of dimensions in which we can adjust that if we deem it to be appropriate. Right now, we like the job it's doing. If the facilities are extended, we could certainly look at new facilities. If things deteriorate, that would be the case where you'd want to maybe continue the facilities and maybe change them, and maybe you have new ones. Who knows? But certainly, the facilities have been doing a lot of work and been very successful, I think, overall in accomplish accomplishing that job. So I do think there are things that we can do, but remember, we've always said this will take a whole of government approach, including healthcare policy and fiscal policy too. If you want to get the economy back as quickly as possible to where we want it to be, then really, it should be all of government working together. Craig Torres: (48:08) If I could just follow up on that quickly... I mean, you spoke about the small business lending program, but that has only reached 400... There's only been 400 loans. [inaudible 00:48:20]. Do you not think there's more that could be done with another type of program or another [redesign 00:48:23], either for small businesses or, as I said, state and local governments? Jerome Powell: (48:33) Yes. There's a bunch of programs. I would say that the larger corporate market-based lending program has been very successful without making a single loan. I think unambiguously, it has been a big success. I think the state and local government program has also restored market function, whereas there were the sort of individual investors who wind up funding loans in the muni market through mutual funds. They had withdrawn a lot of money, and we've had many weeks consecutively, I believe, of inflows there, and you're largely back to a normal functioning market. I think that's also been a success. I think certainly the funding market programs have been a big success. Main Street is just a bigger challenge than all of them. Reaching out to small and medium-sized businesses through the banking system, which we had to do, is quite challenging. Jerome Powell: (49:25) I do think the grant programs, the PPP, were a great way to reach smaller companies. What you hear out there is that demand... You talk to banks, and they'll say demand for loans is very, very low right now. Companies are not borrowing, and the reason is that activity is at a relatively low level. They don't want to run up their debt. So we put an awful lot into Main Street. And it is very challenging to reach a lot of those companies, but I think we are reaching many of them now, and I hope that the new changes will help us reach more. Speaker 4: (50:10) Thank you. Last question to Michael McKee, Bloomberg. Michael McKee: (50:14) Mr. Chairman, there's a small but growing number of people, including some former Fed economists, who say you should find ways to go beyond your mandate to provide additional support to the economy, which in essence would be fiscal support since it hasn't come from Congress. One of the suggestions is buying state and municipal securities directly. Another is perhaps following the BOE in increasing asset purchases to support additional fiscal programs or spending by the Treasury. Is there any circumstance under which you would consider those, or those would be justified? How closely are you willing to work with Treasury? Jerome Powell: (50:55) So I'm going to take your question literally. And so if the idea is money-financed fiscal policy, that's not something that we would consider. So what I mean by that is really, the central bank is really funding fiscal activities of the government fairly directly. No, that's not something we would do. We have different jobs. That separation between those jobs is absolutely critical in our system of government. The job of taxation and spending goes to people who have stood for election and been elected, and that's the way it should be. They have to be responsible to the electorate. We have a specific job to do with a specific set of tools to support maximum employment, stable prices, financial stability, help the payment system, supervise banks, all the things we're assigned to do, but we're not going to get into financing the government. Jerome Powell: (51:50) And by the way, when we buy government bonds, it doesn't actually, as you probably know, doesn't change the amount of government debt outstanding. We issue a reserve to purchase a Treasury security, and that's just another form on the consolidated balance sheet of the federal government. That's just another obligation. You change the nature of the obligation, but not the total quantity of debt that the government has when you do these asset purchase programs. So I don't know exactly what you're referring to, but again to take your question literally about financing fiscal activity, it's really not something that we think the central bank should do, and not something we're looking at. Michael McKee: (52:32) If I could follow up, there is a suggestion that you buy state and municipal securities directly in the same way that you buy mortgage-backed securities, providing then cash to municipalities that are cash strapped at this point. Jerome Powell: (52:46) Well, we're doing that with the Municipal Liquidity Facility now. So we're buying with our own funds and with the CARES Act funds that we've gotten through Congress and the Treasury. We're buying municipal securities of up to three years. So we're doing that now as part of an emergency facility under Section 13(3), which has to meet the emergency requirements of exigent circumstances, which is all clearly laid out in the law. So we're actually doing that now. What that is, from our standpoint, is a rare thing that we do under Section 13(3) when regular intermediation in the capital markets or in the banking system has broken down. It's no longer working. So we step in under 13(3), and we provide liquidity. What turns out to happen is we announce a program and the market starts working. Jerome Powell: (53:39) So we only actually have to do a backstop. The amount of financing that's happened in the municipal markets this year is much higher than it was the prior year, and we didn't do it. We've done a very small number of loans, but just the fact that we're there as a backstop seems to get the private parties to get back together and get the market working again. So that's what 13(3) is for. That shouldn't be a permanent thing where we're just another federal financing agency that's available to direct credit to very worthy borrowers. That would be more along the lines of a GSE. That's not what we do. We're there to provide emergency liquidity when intermediation has broken down, and then to pull back on that as the markets normalize. We pull back and we put those tools away, as we did after the global financial crisis, and as we will here when the time comes. Speaker 4: (54:39) Thank you very much. Jerome Powell: (54:39) Thank you, thank you.