Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin will give their first report on the economic stimulus programs implemented by the $2.2 trillion CARES Act when they testify before the Senate Banking Committee on Tuesday.
Powell and Mnuchin could face questions on the small business lending program, the direct stimulus payments Treasury is sending out to about 150 million Americans, as well as the central bank’s Main Street lending program for small and mid-sized businesses.
Having triggered yesterday’s record euphoric rally with his 60 Minute comments saying “I would never bet against the American economy or the American people. We have a great economy” and just in case we don’t, Powell said he was ready to print trillions more if he had to (he does) stating “we’re not out of ammunition by a long shot,” Powell’s prepared remarks ahead of his virtual hearing before the Senate Banking Committee were more of the same, with Powell vowing to “to maintain near-zero rates until the economy has weathered the crisis” and repeating the “Fed will use full range of tools to support the economy.”
“We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response, Powell said adding that “we expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals.”
So pretty much forever.
There were no surprises, however, as much of Powell’s prepared testimony was a review of programs put in place by the central bank.
Powell’s testimony will begin at 10am on Tuesday, and will also feature Treasury Secretary Steven Mnuchin as part of the Senate’s first quarterly CARES Act Report. Now that the Fed and the Treasury are joined at the hip in delivering “helicopter money” to the US, the central bank has launched “unprecedented support” – by monetizing trillions in US debt issuance – for markets and the economy since mid-March. It has slashed interest rates to nearly zero and unveiled nine emergency lending programs, supporting everything from corporate to municipal credit markets as it tried to stabilize access to financing.
In his testimony, Powell will also urge Congress to consider even more fiscal support beyond the $3 trillion in aid already passed, and has said the Fed is willing to do more if needed to support the economy, by which he meant expanding QE even more.
Despite the Fed’s support, every indicator of the U.S. economy shows history-making declines as economic activity slammed into a sudden stop as households sheltered in place. Employers cut 20.5 million jobs last month, tripling the unemployment rate to 14.7%, the highest since the Great Depression. Powell said the scope and speed of the downturn “are without modern precedent and are significantly worse than any recession since World War II.”
Powell’s full remarks are here.
Mnuchin’s full remarks are here.
Watch the full hearing live here (due to start at 10amET):