Federal Reserve Chairman Jerome Powell will be on hand to offer reassurance to investors this week that he’ll keep policies in place to aid the U.S. economy at a bleak moment of recession, disease and civil unrest.
Fed officials — who have already unleashed a torrent of liquidity to ease financial market strains — are not expected to augment their guidance for interest rates to stay near zero until the economy is back on track, despite a better-than-expected reading for the jobs market in May. But Powell’s press conference on Wednesday will be closely watched for hints on how much more, if any, further stimulus he thinks will be needed.
Yield-curve control, where the Fed targets asset purchases to cap yields on Treasury bonds, is among the tools they’ve discussed in the past. More broadly, Powell can expect questions on whether signs the worst may be over for the economy means the Fed can start thinking about withdrawing some of its emergency support, or if more is still needed. That could focus attention on a shift in its bond-buying strategy to deliberately target easier financial conditions. The Fed is currently buying bonds to ensure smooth market functioning and has scaled back daily purchases sharply since the opening days of the pandemic.
What Bloomberg’s Economists Say…
“The Fed’s Main Street Lending Program, which is in the process of coming online, arrives at a critical time when the economic recovery will heavily rely on policy support. The trajectory of the recovery in the second half of the year remains highly uncertain and will depend on policy makers’ actions. At the post-FOMC meeting press conference on Wednesday, Powell will stress the central bank’s willingness and ability to provide additional stimulus.”
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This week also sees European Central Bank President Christine Lagarde questioned by lawmakers, just a few days after her institution boosted its stimulus program. The World Bank and the Organization for Economic Cooperation and Development are scheduled to publish their latest economic predictions.