Apr 30, 2020 - Economy & Business

Fed commits to "whatever it takes" to help economy vs. coronavirus

Dion Rabouin, author of Markets

Photo illustration: Sarah Grillo/Axios. Photo: Scott Olson/Getty Images

Fed chair Jerome Powell made clear the U.S. central bank had no plans to raise interest rates anytime soon and expects the economy to need monetary assistance for some time.

  • In his Wednesday remarks, Powell expressed concern about "considerable risks" to the economic outlook over the "medium term," which he defined as at least over the next year.

Why it matters: Powell and the Fed have been out in front of the global policy response to the coronavirus pandemic from day one, taking an abundance of precautionary action long before the impact of the virus was clear to most others.

Between the lines: The Fed's statement opened by saying the central bank "is committed to using its full range of tools," one of few notable changes from its policy statement last month, but one that set a clear tone.

  • "We are going to be very patient," Powell said during the press conference. "That means we are not going to be in any hurry to move rates up."

What it means: "The message appears to be that officials are planning on making the forward guidance more dovish, and with more specificity, before too long," analysts at TD Securities said in a note to clients.

  • That could potentially include: some inflation targeting, a plan to hold rates at zero until unemployment reaches a certain level, or yield curve control policies focused on holding U.S. interest rates near the zero lower bound, they added.
  • "We are keen to see the minutes in three weeks time."

The bottom line: "The Fed is committed to doing 'whatever it takes,' and more, just to make sure," BlackRock CIO of global fixed income Rick Rieder said in a note to clients, quoting former ECB president Mario Draghi's famous pledge during the eurozone debt crisis.

  • "The FOMC has at this meeting taken the opportunity to begin laying out the transition from emergency support of market functioning to a longer-term Large-Scale Asset Purchases regime."

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