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Fed Makes Limitless Cash Available To Cope With Pandemic, Uncertain Economy

By Investing.com (Darrell Delamaide/Investing.com)Market OverviewApr 30, 2020 10:04AM ET
www.investing.com/analysis/fed-makes-limitless-cash-available-to-cope-with-pandemic-uncertain-economy-200523115
Fed Makes Limitless Cash Available To Cope With Pandemic, Uncertain Economy
By Investing.com (Darrell Delamaide/Investing.com)   |  Apr 30, 2020 10:04AM ET
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“We won’t run out of money,” may be the most important takeaway from Federal Reserve Chair Jerome Powell’s remarks via a videoconference with the press Wednesday after the meeting of the Federal Open Market Committee.

And the US central bank may need to deploy a lot of it, as policymakers see the coronavirus crisis weighing heavily on the economy in the near term and posing “considerable risks to the economic outlook over the medium term,” which Powell describes as the next year or so. In response to a question, Powell enumerated these risks as the course of the virus itself, the amount of damage done to the economy, and the global extent of that impact.

As Much As It Takes, As Long As It Takes

The Fed for one is willing to throw as much money at the crisis as necessary, and Powell feels fiscal authorities should pull out all the stops, too. He described himself as a fiscal conservative who urged consolidation of public debt even before coming to the Fed, but, he said, “now is not the time to act on these concerns.”

Though not as succinct as “whatever it takes,” the message from the Fed was that the US central bank will do whatever it takes to the extent that it can and that is a pretty wide extent.

Powell’s remarks came at a lectern that clearly was not in his basement. His dark blue suit, crisp white shirt and tie (and a neat haircut which he somehow got even though barber shops are closed in Washington) conveyed a calm determination in the face of an unprecedented challenge.

The stakes were high and Powell was clearly reluctant to veer from his prepared remarks, often answering questions by repeating excerpts from them. Journalists wanted details on how long and how big Fed aid would be, which the Fed Chair could not and would not provide. Basically, as much as it takes as long as it takes was his answer.

On questioning, Powell said the Corporate Credit Facility to make loans to large employers would be ready to go “soon, very soon,” while the Main Street Lending Program would be launched not quite so soon as the Fed reworks the term sheet to take account of comments.

Powell dodged a question about why the Fed doesn’t simply call its new asset purchase program quantitative easing, and describe its length and volume as it has earlier QE tranches. But he did concede in his opening remarks that policymakers consider the purchases “accommodative” in monetary policy terms as well as effective in stabilizing markets.

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DXY 60 Minute Chart

Though the dollar edged lower after Powell's remarks, equities gained on Wednesday, albeit driven primarily by the news that Gilead Sciences (NASDAQ:GILD) is making progress much more quickly than expected in finding a treatment for COVID-19. Powell’s remarks brought US stocks back near highs for the day.

Powell’s comment about not running out of money came in the context of a government fund of $350 billion to aid small business that was quickly depleted, prompting Congress to rush legislation to replenish it. But the Fed Chair repeatedly noted the Fed has authority to lend, not spend, and could only lend to solvent businesses that evidenced an ability to repay the loans. Nonetheless, the Fed loans are backstopped by $454 billion from the Treasury Department to cover the first losses, enabling the Fed to loan as much as ten times that amount.

When asked whether Congress would eventually have to do more, Powell responded with an unequivocal “Yes.” Both monetary and fiscal stimulus will be needed to limit economic damage and to support recovery.

As for the Fed, interest rates will be staying at the effective lower bound—that is, near zero—for a considerable time, Powell said. That is what the markets are expecting and this is appropriate, he added.

There was no dissent from voting members about the FOMC decision to leave the benchmark rate at that level this time around, though Cleveland Fed chief Loretta Mester had objected at the emergency March 15 meeting to lowering it a full percentage point all at once, after the half-point cut March 3.

Bottom line: America, the Fed’s got your back.

Fed Makes Limitless Cash Available To Cope With Pandemic, Uncertain Economy
 

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Fed Makes Limitless Cash Available To Cope With Pandemic, Uncertain Economy

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Comments (14)
Joe Ruscigno
Joe Ruscigno Apr 30, 2020 7:24PM ET
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The Fed thinks they have limitless money. We’re so screwed.
Nilanjan Bhattacharya
Nilanjan Bhattacharya Apr 30, 2020 12:36PM ET
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The most dangerous comment I ever heard... "We won’t run out of money".
Pedro Leal
Pedro Leal Apr 30, 2020 12:36PM ET
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That's bluff if you ask me. They want everyone to believe that, so they don't actually need to spend more.
Joe Ruscigno
Joe Ruscigno Apr 30, 2020 12:36PM ET
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Ironically, they have no money.
abbas shojaee
abbas shojaee Apr 30, 2020 11:18AM ET
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Mohammad
Steve Moussouras
Steve Moussouras Apr 30, 2020 8:53AM ET
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Its funny how other countries are having minimal deaths and surviving without printing any money and we have the most deaths and unreal amounts of money spent.For something that has no relation to money but are making it the key subject
Pedro Leal
Pedro Leal Apr 30, 2020 8:53AM ET
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Have you noticed how European markets are react positively when the FED prints trillions into us economy. And that's free for the Europeans. Hurrey for FOMO.
Julez Jay
Julez Jay Apr 30, 2020 8:53AM ET
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This pandemic is nothing but a big tax payer scam and wealth transfer for some. Biggest opportunity to literally print money into already full pockets.
Miguel Roman
Miguel Roman Apr 30, 2020 8:53AM ET
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It's all about and always been about money even from the beginning of this plandemic
Rodolfo Barraco
Rodolfo Barraco Apr 30, 2020 8:53AM ET
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Julez Jay indeed. And no one notices it
Jose Pina
Jose Pina Apr 30, 2020 8:28AM ET
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Una mattina mi sono alzato.o bella ciao, bella ciao, bella ciao ciao ciao.this is pretty much the summary of how printing limitless cash is done
Lance Van Dusen
Lance Van Dusen Apr 30, 2020 8:26AM ET
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Stock market may reach all time highs but a hamburger will be $20 by 2021.
Joe Ruscigno
Joe Ruscigno Apr 30, 2020 8:26AM ET
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Only if you don’t want ketchup.
Pietro Rosato
Pietro Rosato Apr 30, 2020 8:23AM ET
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How can you not run out of something you never had?
James Duke
James Duke Apr 30, 2020 8:22AM ET
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When you are printing a quarter of our GDP in new money, and have plans to print much more. The equities are not close to where they should be, the markets are fueled by hope and euphoria of a rapid reopening of the economy which is almost impossible from a logistical point of view. The core of our economy, the consumer is going to be hurting for many months, or years. Fundamentals are not reflected in stock prices. I hear the bull case that the market is foward looking and I agree. What is the market exactly looking at though? A lot of uncertainty and less consumer spending and income, that shows how big the detachment from Wall St to Main St actually is.
Ross Dre
Ross Dre Apr 30, 2020 8:14AM ET
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I only came for the comments. It’s good to see the majority appears to not be fleeced.
J K
J K Apr 30, 2020 8:11AM ET
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the most important takeaway or the most CATASTROPHIC
 
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