Jerome Powell Announcement Transcript: Fed Cuts Rates Amid Coronavirus Outbreak

Jerome Powell: (00:40) Good morning everyone. Speaker 2: (00:44) Good morning. Jerome Powell: (00:45) Earlier today, the Federal Open Market Committee announced a one-half percentage point reduction in the target range for their federal funds rate, bringing that range to 1:1 and a quarter percent. My colleagues and I took this action to help the US economy keep strong in the face of new risks to the economic outlook. The fundamentals of the US economy remains strong. The unemployment rate has been near half century lows for well more than a year. The pace of job gains has been solid and wages have been rising. Jerome Powell: (01:19) These strong labor market conditions have underpinned solid household spending, which has been the key driver of economic growth over the past year. At the time of our FOMC meeting in January, prospects for continued economic growth remained favorable and we judged that monetary policy was well positioned to support that outlook. Jerome Powell: (01:40) Since then, the spread of the Corona virus has brought new challenges and risks. The virus has afflicted many communities around the world and our thoughts and prayers go out to those who've been harmed. The outbreak has also disrupted economic activity in many countries and has prompted significant movements in financial markets, the virus and the measures that are being taken to contain it will surely weigh on economic activity both here and abroad for some time. Jerome Powell: (02:09) We are beginning to see the effects on the tourism and travel industries and we are hearing concerns from industries that rely on global supply chains. The magnitude and persistence of the overall effects on the economy however, remain highly uncertain and the situation remains a fluid one. Against this background, the committee judged that the risks to the US outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy. Jerome Powell: (02:39) Of course, the ultimate solutions to this challenge will come from others, particularly health professionals. We can and will do our part however, to keep the US economy strong as we meet this challenge. As always, our actions are guided by our congressional mandate to promote maximum employment and price stability. Jerome Powell: (03:00) In the weeks and months ahead. We will continue to closely monitor developments and their implications for the economic outlook and we will use our tools and act as appropriate to support the economy. Thank you. And I'll be happy to take a few questions. Speaker 3: (03:14) Nick. Nick Timiraos: (03:20) Thank you. Nick Timiraos. So The Wall Street Journal, two questions. First, what changed between last week when many of your colleagues seem to indicate it was still too soon to tell how this might influence the outlook, what changed between last week and today and then how much confidence do you have that there will be a quick and relatively complete recovery of economic activity after the peak of this virus has passed. Jerome Powell: (03:48) So what changed? Of course we've been carefully monitoring the situation since it first became known and waiting to see how it would evolve. I think we've come to the view now that it is time for us to act and support the economy. Once you reach that decision we decided to go ahead. Jerome Powell: (04:07) So what changed really was, I would say over the course of the last couple of weeks we've seen a broader spread of the virus. We've seen it begin to spread a bit here in the United States. But for us, what really matters of course is not the epidemiology but the risk to the economy. So we saw a risk to the outlook for the economy and chose to act. Jerome Powell: (04:28) In terms of my confidence that we'll return to... what was your question? What's that question? Nick Timiraos: (04:33) How do you expect the economy to recover from this? Do you see it as a persistent decline in activity or something that will be relatively temporary and short-lived? Jerome Powell: (04:42) I don't think anybody knows how long it will be. I do know that the US economy is strong and we will get to the other side of this and I fully expect that we'll return to solid growth and a solid labor market as well. Jim Tankersley: (05:02) Hi Mr. Chairman. Jim Tankersley, New York Times. You said that the ultimate solutions will come from others and I have two questions about that. First, is this a coordinated part of a coordinated action with other central banks and should we be expecting to see more as part of that? Second, what would you like to see from American fiscal policymakers in response to these new threats? Jerome Powell: (05:25) Okay, so first question, we're in active discussions with central banks around the world on an ongoing basis, as you would guess. I've been in regular contact with central bank leaders from around the world, that will continue. Central banks are doing what makes sense in their particular institutional context, but we're all talking to each other on an ongoing basis. Jerome Powell: (05:46) Our action today represents what we think is the right policy for us in our particular institutional context under our domestic mandate. You saw this morning G7 statement of finance ministers and governors, and I think that statement does reflect coordination at a high level in the form of a commitment to use all available tools, including healthcare policy, fiscal policy, and monetary policy as appropriate. Jerome Powell: (06:12) So in terms of fiscal policy, again, not our role. We have a full plate with monetary policy, not our role to give advice to the fiscal policy makers. But you saw the mentioning of the G7 statement as appropriate as well. Speaker 3: (06:28) Heather. Heather Scott: (06:40) Heather Scott with AFP. The G7 statements seem to indicate that- Speaker 7: (06:44) I'm sorry. [inaudible 00:06:44] with the mic. Heather Scott: (06:44) Heather Scott with AFP. The G7 statements seem to indicate that the policymakers would use tools, but we're not going to do anything imminent. Does this contradict that or is this in keeping with the statement by the G7 this morning and can I ask what would cause you to take another step, what would you be looking for as terms of the economic outlook or data? Jerome Powell: (07:08) So the sense of the G7 is to... We have seven countries obviously and different policies, different situations, different mandates, a lot of overlap in the sense of that is to get together as a group and say at a high level that these are the things we're going to do. We're going to use our tools, all of our tools in a strong way to try to support the economy. Jerome Powell: (07:31) So it's a statement of general support. I think within that you will see actions, you've seen our action and I think it's up to individual countries, individual fiscal policies and individual central banks to do what they were going to do. I would think it's possible there will be some more formal coordination as we move forward. In terms of moving forward, I would say that we do like our current policy stance. We think it's appropriate to support achievement of our dual mandate goals. But as I said in my statement, we're prepared to use our tools and act appropriately depending on the flow of events. Heather Scott: (08:19) But anything particular you're watching that would change that. Jerome Powell: (08:20) I can't point to any one thing. It's always a range of things. Speaker 3: (08:26) Heather Long. Heather Long: (08:26) Heather Long from the Washington Post. There's been some, a rising concern about credit markets and possible insolvencies and defaults either from businesses or individuals from the Corona virus. Can you speak to, is the FOMC talking about this, are we likely to see any emergency provisions from the CRA activated or things that you normally do during a hurricane or that type of a disruption to the economy? Jerome Powell: (08:51) So we don't see any of that happening yet. Of course we are thinking about what we can do should those things happen. There's no evidence yet. The economy continues to perform well. As I mentioned, we do hear concerns particularly from those most directly exposed, but there's nothing in that nature. Financial markets are functioning in an orderly manner and all that sort of thing. Jerome Powell: (09:14) I think when it comes to those sorts of issues though, the supervisors will be working with banks to assure that they work with their borrowers and that sort of thing. So I can imagine us doing those sorts of things, but those things are not upon us at the moment. Speaker 3: (09:32) Brendan. Brendan Greeley: (09:35) Thank you. Brendan Greeley Financial Times. Has the committee discussed any other monetary policy tools in addition to rate cuts and the pacing and timing of when they might be appropriate? Jerome Powell: (09:45) Well, as you know, we're in the middle of a review of all of our tools. So if you go back a few meetings, we've talked about what our toolkit is and we've put that in the minutes. But in the current context, no, what we discussed is the current stance of policy. Is it appropriate, came to the view that it was appropriate to make a change and went ahead did that today. Speaker 3: (10:06) Rich. Speaker 10: (10:07) Hi. Rich Miller with Bloomberg. Thank you very much for having a press conference. Can you take us a little through the reasoning behind the right cut a little bit more in depth. Was there a... Some Communists say this is the supply side shock, the rate cuts are not particularly suitable for this. Others say, well the supply guys cock may morph into a demand shock. I wonder if you could just give us a little bit more depth on the reasoning behind the rate cut. Thank you. Jerome Powell: (10:33) Sure. I'd be glad to. So the virus outbreak is something that will require a multifaceted response and that response will come in the first instance from healthcare professionals and health policy experts. It will also come from fiscal authorities should they determine that a response is appropriate and it will become from many other public and private sector actors, businesses, schools, state and local governments. Jerome Powell: (10:59) But there's also a role for monetary policy. Monetary policy can be an effective tool to support overall economic activity. We do recognize that a rate cut will not reduce the rate of infection. It won't fix a broken supply chain. We get that. We don't think we have all the answers, but we do believe that our action will provide a meaningful boost to the economy. Where specifically, it will support accommodative financial conditions and avoid a tightening of financial conditions which can weigh on activity and it will help boost household and business confidence. That's why you're seeing central banks around the world responding as they see appropriate in their particular institutional context. Speaker 3: (11:36) Elon. Elon Moy: (11:39) Thanks. Elon Moy from CNBC. Can you tell us what you would do if the virus ends up being contained fairly quickly? Would you envision the Fed actually raising rates in short order if the economic damage doesn't occur the way that you potentially fear? I have a second question, which is a President Trump was just tweeting about you this morning and talking about the Feds need to cut rates. Did you feel any political pressure to make this move? Jerome Powell: (12:11) On your first question, we're always going to set monetary policy at a given time in a way that we think best serves our dual mandate goals. And it's as simple as that. If we get to a place where we think it's an inappropriate time to change the stance of monetary policy, we won't hesitate to do that. I would also say that it's very important that people understand that we will always make our decisions based on the best thinking we have based on our what we learned from our outreach to businesses, non-profits, educational institutions that we get every cycle through the reserve banks and the best analysis, the best research. Jerome Powell: (12:56) We're always going to make our decisions in the interest of the American people to carry forward and try to achieve the mandates that Congress has given us. We're never going to consider any political considerations whatsoever. We will not do that and it's very important that the public understand that. Speaker 3: (13:11) Hey, Chris for the last question. Chris Rugaber: (13:17) Chris Rugaber at Associated Press. I know you mentioned a little bit of outreach, some of the Fed bank presidents were talking about last week. How much did they were going to listen to their context? Have you gotten reports sort of from the ground, from your business contacts, the non-profits and so forth that have affected your decision making? What are you hearing from all those folks? Thank you. Jerome Powell: (13:38) So we are hearing, I would just say the effects are at a very early stage, but you are hearing concerns from people, for example, in the travel business or the hotel business and things like that. That's what you're hearing, but you don't see things showing up in actual data. You do see them showing up in sort of sentiment forecast indicators and things like that. We expect that will continue. It will probably grow and that's one of the reasons why we've come to the view that it would be appropriate for us today to move, to support the economy. And that's what we've done. Speaker 3: (14:17) Thank you. Jerome Powell: (14:17) Thanks very much.