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Yellen says Fed purchases of stocks, corporate bonds could help in a downturn

Published 09/29/2016, 05:06 PM
© Reuters. Federal Reserve Chairman Yellen delivers the semi-annual testimony on the "Federal Reserve's Supervision and Regulation of the Financial System" before the House Financial Services Committee in Washington

WASHINGTON (Reuters) - The Federal Reserve might be able to help the U.S. economy in a future downturn if it could buy stocks and corporate bonds, Fed Chair Janet Yellen said on Thursday.

Speaking via video conference with bankers in Kansas City, Yellen said the issue was not a pressing one right now and pointed out the U.S. central bank is currently barred by law from buying corporate assets.

But the Fed's current toolkit might be insufficient in a downturn if it were to "reach the limits in terms of purchasing safe assets like longer-term government bonds."

"It could be useful to be able to intervene directly in assets where the prices have a more direct link to spending decisions," she said, adding that buying equities and corporate bonds could have costs and benefits.

Yellen told a conference last month the Fed would fight a future recession by buying government debt and jaw boning interest rates lower with pledges on future policy. But she said other tools might be necessary, including expanding the range of assets it would purchase.

In that speech, she also cited possibilities like raising the central bank's 2 percent inflation target or targeting the nominal level of national economic output.

Latest comments

i found this outrageous. There is a law for a reason. FED buying stock would distort the market in such a way that would be just a joke. During the successive QE the FED bought bonds and gave money to banks to support shares. Is nearly the same thing but at least some dignity. Where is America, the home of liberalism and freedom?
isn't what they already doing so hard?
yeah mate, we r in a downturn yet they wont let anyone know. Funny how companies earnings are at record lows but their share prices are climbing. Something is definitely up. Another big crash is coming. Maybe the failing Deutsche. bank will trigger it
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