The US economy was on a strong footing before the virus health crisis and Fed officials are working to help the economy rebound quickly once businesses that were shuttered because of the coronavirus lockdown begin to reopen
Economic numbers may get ugly near term because of the halt to activity, but policymakers are doing what they can to support the businesses and consumers affected the most, Cleveland Fed President Loretta Mester said Friday.
“What public policy needs to do, and this includes the Fed, is to help ensure that the shutdown in activity that is being felt doesn’t cause lasting damage to the economy,” Ms. Mester said during a virtual forum organized by the City Club of Cleveland. “And to make sure that we give aid and relief to the employees and workers and the businesses that are bearing the brunt of that shut down.“
Nearly 17-M Americans filed for unemployment benefits in the last 3 wks, according to data released Thursday by the Labor Department, revealing the scale of the shock reverberating through the US economy as businesses across the country shuttered to slow the spread of the coronavirus.
The US economy “has been placed in hibernation. Its temperature has been brought down. It can be revived without permanent damage,” Fed Vice Chairman Quarles said in a web presentation hosted by the University of Utah. “The measures we have taken in conjunction with the Treasury and additional measures that Congress has put in place are designed to ensure that the hibernation period we can go through with the least amount of damage, and I believe we will do that.“
Congress and the Fed acted rapidly over the course of a few wks to approve trillions of dollars in benefits and loans meant to reach every household and business in the country.
Fed officials slashed rates to Zero, launched open-ended bond purchases and introduced a suite of emergency lending tools.
State unemployment insurance systems are struggling to process claims from the millions of newly unemployed, and the Small Business Administration (SBA) has been overwhelmed with applicants for small business loans.
Friday, Ms. Mester said the process for returning to work will be determined by health officials and that it will need to happen in stages.
Until then, the Fed is working to make sure markets are functioning smoothly and that the households and businesses in need of credit can access it.
Mr. Quarles said it would probably be 2-3 wks before the Fed’s own new “Main Street” lending program, which will offer loans to medium-sized businesses, would be up and running.
“We are putting together the mechanisms for that credit to be distributed through the banks,” Mr. Quarles said of the program that would make up to $600-B in loans available to mostly mid-sized companies. Final details are “probably 2 to 3 weeks away,” he said.
Have a happy healthy Easter and Passover weekend, stay home, Keep the Faith!