Fed Chairman Powell Calls for More Fiscal Support as Recovery will be Slow, Rules Out Negative Rates

Federal Reserve Chairman Jerome H. Powell said on Wednesday that policymakers might need even stronger fiscal and monetary measures to restore the economic downturn that cost at least 20 million jobs.

“The recovery may take some time to gather momentum,” which can turn the ongoing liquidity problem into “solvency problems,” Powell said in a webcast event with the Peterson Institute for International Economics.

Coronavirus has triggered a situation that is unlike previous recession the US endured as such Congress is required to respond with more.

Negative rates not coming yet But more stimulus is

In the first quarter, the Fed cut its benchmark rate to near zero and Congress passed $3 trillion for the stimulus package. He said,

“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks.”

As for the negative interest rates, which President Donal Trump has been in favor of, Powell said, “it’s not something that we’re considering.”

Traders meanwhile have been pricing the rates edging into negative territory by the end of 2020 or in early 2021.

Recovery may take some time to gather momentum

The prepared remarks from the central bank came days after the Labor Department reported nonfarm payroll fell by 20.5 million last month and the unemployment surged to 14.7%, both the worst since the Depression.

Source: TradingEconomics

“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” added Powell while noting that

“the job gains of the past decade have been erased.”

GDP is expected to plunge as well by record levels in the second quarter with Goldman Sachs forecasting quarter-on-quarter annualized hit in Q2 to be -39% but it will be followed by a faster recovery in Q3 +29%.

But according to Powell, this recovery “may take some time to gather momentum,” as the longer the health risks persist the more likely business will fail and households will be short for income.

Stock Market Drops, Bitcoin Rising

The worst-case outcome will leave the economy in “an extended period of low productivity growth and stagnant incomes.”

“Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said which could be a direct call for Congress to allocate more funds for economic relief.

“This tradeoff is one for our elected representatives, who wield powers of taxation and spending.”

These remarks from the central bank chief resulted in both the Dow Jones Industrial Average and S&P 500 siding more than 3% from yesterday’s high.

Bitcoin meanwhile jumped above $9,100, up 2.33% while managing the daily trading “real” volume of $1.5 billion.

With this latest development, bitcoin and stocks continue to decouple as such the equity market is losing relevance for the crypto market.

Get Free Email Updates!

*Action* Enter Best Email to Get Trending Crypto News & Bitcoin Market Updates

I will never give away, trade or sell your email address. You can unsubscribe at any time.

AnTy has been involved in the crypto space full-time for over two years now. Before her blockchain beginnings, she worked with the NGO, Doctor Without Borders as a fundraiser and since then exploring, reading, and creating for different industry segments.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer


Please enter your comment!
Please enter your name here


Live Bitcoin Price & Latest BTC Charts

Today's Latest Crypto News

China State-Owned Media Covers Crypto as 2020’s Best Performing Assets Driven by DeFi & Weak Dollar

In an unusual coordinated report on Friday, several Chinese state-owned media covered cryptocurrencies, calling them the best-performing assets of 2020. The country’s top broadcaster, China...

Crypto Exchange Gemini Makes an Aggressive Move, Adds 15 Hot DeFi Tokens

DeFi is all the rage in today's crypto world, and no one wants to be left behind, especially cryptocurrency exchanges. Over the past few months,...

Ethereum ‘Getting Ready for Spadina' Testnet Next Week

The Spadina testnet of ETH 2.0 has been scheduled for genesis before the month ends, on September 29 at 12 pm UTC, as per...

KuCoin Hack: Exchange’s Insurance Fund to Cover User Loss “Completely,” Tether Freezes 33M USDT

The Singapore-based cryptocurrency exchange KuCoin released a statement regarding detecting large withdrawals on September 26, 2020, at 03:05:37 (UTC+8). The exchange has reportedly lost $150...

Crypto Custodian, Anchorage, Adds Support for DeFi Tokens: BAL, NXM, AAVE, UNI, and YFI

Anchorage, the Delaware corporation headquartered in San Francisco, California, and digital asset custodian for institutional investors is diversifying its DeFi token options for its...

BitcoinExchangeGuide is a hyper-active daily crypto news portal with care in cultivating the cryptocurrency culture with community contributors who help rewrite the bold future of blockchain finance. Subscribe on Google News, see the mission, authors, editorial links policy, investment disclaimer, privacy policy. Got News? Contact us, we are human too. Note: nothing here is financial advice, do your own research thoroughly.

Start Using Crypto Today