(Reuters) - The Federal Reserve's response to the COVID crisis, which included tried and true tools as well as novel ones, helped offset the unprecedented blow to the U.S. economy last year and will continue to bolster it this year, a top U.S. central banker said Thursday.
In an academic paper that summarized the Fed's pandemic response but did little to foreshadow its policy plans going forward, Fed Vice Chair Richard Clarida noted that the fiscal and monetary policy actions taken since March 2020 were "unprecedented in their scale, scope and speed."
The Fed cut rates to near-zero, bought trillions of dollars of Treasuries and mortgage-backed securities, and promised to keep policy easy for what could be years; it launched emergency liquidity and funding measures to prevent failures in money markets; it rolled out a series of new lending facilities for households and businesses; and it tweaked rules and supervisory practices to encourage banks to keep lending.
"These measures, taken together and in tandem with a historic fiscal policy response, provided crucial support to the economy in 2020 and are continuing to contribute to what is expected to be a robust economic recovery in 2021," Clarida and his co-authors wrote in a paper that meticulously recounted those measures, many of which have now been unwound or are expected to be.
The paper did not address any salient monetary policy issues for the future, however, including how much longer the Fed will continue to buy bonds at its current $120 billion monthly pace.