Chairman Powell Repeats Need For Fiscal and Monetary Stimulus

By Tom Burnett CFA
In a well covered speech on October 6, 2020, Federal Reserve Chairman Jerome Powell repeated his call for greater fiscal support to help maintain the economic recovery. He noted that half the jobs lost due the Covid-19 pandemic and the measures to control the outbreak have been restored. More needs to be done, however, as he warned that the recovery risks sputtering out if Congress does not act. He made it clear that the Fed will continue to do its part with an extremely accommodating monetary policy.
No one should doubt the resolve of the Fed and its Chairman. According to the latest Federal Reserve data, the M2 money supply is now $18.4 trillion, up 23% from a year ago. Interest rates remain at record low levels and the Fed is determined to keep short-term rates low through 2021. The latest Fed balance shows total assets of $7.1 trillion, up from $4.0 trillion one year ago. The balance sheet detail confirms the wide-ranging efforts to supply the markets with liquidity. For example, loans to the municipal market now exceed $16.5 billion, compared to zero one year ago. Similarly, loans to support Commercial Paper and Money Market funding now total $8.5 billion and $7.2 billion respectively. Finally, loans to support corporations directly now exceed $45 billion. The Fed intends to continue its high-profile approach to insuring that the liquidity needs of the recovery are satisfied. It is also clear that the Chairman would like to see more fiscal help from Congress.

Tom Burnett CFA is Director of Research