FOMC PRESS CONFERENCE SUMMARY: Powell reiterates support, suggests the Fed could do more, and says Fed is in no hurry to withdraw support

Analysis details (20:23)

At the press conference, Chair Powell reiterated that rates are to remain at low levels until the economy has weathered the COVID impact. On the economy, Powell said that economic activity would drop at an “unprecedented rate” in Q2, and the jobless rate will likely next week rise into double digits; he added that we will see economic data in Q2 that is worse than anything we have seen, and while he thinks Q3 might see substantial growth, there was still the risk that the virus resurges. Powell played down that the Fed’s policy action could prevent the downside in activity, stating that the downturn will hinge on the broad policy response – preserving the supply of credit to the real economy was essential to set the stage for the recovery. On asset purchases, Powell said that the Fed’s bond buys will foster more accommodative financial conditions, and that the central bank would continue to use tools as long as needed to ensure when the economy begins recovering, that recovery will be robust as possible; on the removal of the dollar amount of asset purchases within that statement, he said the policy stance on asset purchases remains appropriate for now, and the Fed was waiting for see how economic conditions evolve before changing that view, given the difference paths that the economy might take. When asked about deflation threats, Powell said that as long as inflation expectations remain anchored, the US should not see deflation. For companies specifically, Powell said a corporate credit facility was near being finalised, and that it would be shaped and expanded after it begins. Looking ahead, Powell suggested that the Fed and the government may need to do more to ensure that the recovery is robust. In terms of the outlook, Powell identified medium-term risks: the virus and bringing it under control; the possibility of damage to the productive capacity of the economy; the global dimension, where negative data abroad can weigh on the US; Powell believes that the Fed has the policies to address these, but not perfectly. The Fed chair said activity would begin to increase as re-openings begins, but will take time to get to more normal levels of unemployment, but the Fed was in no hurry to withdraw support for the economy.

29 Apr 2020 - 20:22- Research Sheet- Source: Newsquawk