The Federal Reserve and Congress both might have to consider additional steps to help the economy during the COVID-19 pandemic, said the central bank’s No.2 official on Thursday.
“Depending on the course the virus takes and the depth and duration of the downturn it causes, additional support from both monetary and fiscal policies may be called for,” Richard Clarida, the vice-chairman of the Fed, said during a on-line talk with the New York Association for Business Economics.
Clarida said there is much that the central bank doesn’t know about the potential course of the economy.
“But there is one thing that I am certain about: The Federal Reserve will continue to act forcefully, proactively and aggressively as we deploy our toolkit — including our balance sheet, forward guidance, and lending facilities — to provide critical support to the economy during this challenging time and to do all we can to make sure that the recovery from this downturn, once it commences, is as robust as possible,” Clarida said in his prepared remarks.
Clarida is seen as a close confident of Fed Chairman Jerome Powell, and together with New York Fed President John Williams are seen as shaping the central bank’s policy decisions.
Williams spoke earlier Thursday and his remarks were quite similar to Clarida’s speech.
Read: Fed’s Williams sees rebound after couple more ‘very difficult’ months
Clarida said he expects the economy to begin to grow sometime after June. and the unemployment rate should start to come down.
He said the COVID-19 contagion shock will be disinflationary, not just over the next few months but over the next few years.
He noted that core inflation was already below the Fed’s 2% target before the pandemic.
The Fed has also purchased more than $2 trillion of Treasurys and asset backed securities to help the economy. The reduced pace of the purchases lately reflects the substantial improvement in market functioning, Clarida said.
U.S. equity benchmarks were lower Thursday on signs that U.S. and Chinese relations are souring. The Dow Jones Industrial Average
was down over 100 points in lunch-time trading.
See also: Latest on Fed’s expansive rescue programs to keep credit flowing during the coronavirus pandemic