ROOT
Is the Fed’s commitment to ‘whatever it takes and more’ enough?
The US Federal Reserve has committed to do whatever it takes and more to support Americans, as up to 30 million citizens will be out of work following the COVID-19 pandemic.
Is the Fed’s commitment to ‘whatever it takes and more’ enough?
The US Federal Reserve has committed to do whatever it takes and more to support Americans, as up to 30 million citizens will be out of work following the COVID-19 pandemic.
The Federal Reserve has signalled that it will prop up markets indefinitely until it is confident the American economy has weathered COVID-19, but some believe it should be doing more.
The Federal Reserve left rates on hold at a record low of zero to 0.25 per cent and vowed to continue its purchase of Treasury and agency mortgage-backed securities “as needed”.
“To support the flow of credit to households and businesses, foster smooth market functioning, and promote effective transmission of monetary policy to broader financial conditions, we have been purchasing large amounts of Treasury and agency mortgage-backed securities,” Federal Reserve chairman Jerome Powell said in a statement.
“While the primary purpose of these securities purchases is to preserve smooth market functioning and effective policy transmission, the purchases will also foster more accommodative financial conditions.”
Mr Powell also de-emphasised the use of negative rates, holding up forward guidance and the continuation of its asset purchase plans as more appropriate policy.
Rick Rieder, BlackRock chief investment officer of global fixed income, believes the Fed is now affirming its transition from emergency financial market support to a long-term large-scale asset purchase plan – “QE indefinitely – that will see it prop up markets essentially indefinitely.
“The overarching theme of yesterday’s FOMC statement and press conference was that the Fed is committed to doing ‘whatever it takes’, and more, just to make sure as strong as possible a recovery can be re-established,” Mr Rieder said.
“As such, it’s abundantly clear from the new FOMC statement and press conference that this represents chair Powell’s ‘Mario Draghi Moment’ where like the former president of the ECB, he’s effectively committed to ‘do whatever it takes’ to aid the economy through this severe stress.”
However, Aberdeen Standard Investments senior global economist James McCann believes the Fed “needs to be bolder” and “cannot afford to rest on their laurels”.
“Its first step should be to increase the scale and scope of its credit-easing measures to ensure that liquidity flows to those parts of the economy facing a crunch,” Mr McCann said.
“It also needs to innovate and helicopter money should be on the table. What’s being considered at the moment isn’t genuine helicopter money because the measures being proposed to fund fiscal efforts are not permanent. That’s a crucial difference.
“By making them permanent, the Fed could powerfully boost growth and inflation, in a way that’s unlikely to happen if they just stick to the same old tools.”
RELATED ARTICLES
About the author
About the author
Earn
Australian employment data shows mixed signals as full-time jobs rise despite overall decline
Australia's employment landscape presented mixed signals in May, with overall employment declining despite a strong rise in full-time positions, according to analysis of the latest Labour Force dataRead more
Earn
Millennials face 'generational squeeze' as most vulnerable group in retirement
Millennials will be the most vulnerable demographic to face the "generational squeeze" in retirement, caught between supporting elderly parents and adult children while funding their own later years, ...Read more
Earn
Top workplaces for women in 2025 highlight progress in gender equity and inclusive leadership
Australia’s top workplaces for women in 2025 have been announced, recognising companies that are leading the way in gender equity, flexible work arrangements and inclusive leadership development. Read more
Earn
Employee satisfaction dips as Australian workplaces tackle retention challenges
Australian workplace satisfaction has declined to 78 per cent as companies grapple with economic pressures and changing work dynamics, according to a new report. Read more
Earn
Simplify your finances: The benefits of debt consolidation loans in Australia
In an era where managing multiple debts has become a common financial challenge for many Australians, debt consolidation loans emerge as a practical solution to streamline finances and regain controlRead more
Earn
Long-term welfare dependency declines despite rise in JobSeeker recipients
New research from e61 Institute has revealed that, contrary to popular belief, the number of people reliant on the benefit system in Australia has declined over the past two decades, despite an ...Read more
Earn
Best property investment strategies in Australia for 2024: An expert's perspective
As the Australian property market continues to evolve, investors are keenly looking for strategies that will yield the best returns in 2024. Read more
Earn
Innovative tax saving techniques for individuals and families
Tax time can be daunting for many Australians, but with some innovative planning and smart strategies, individuals and families can maximise their tax savings. Read more
Earn
Australian employment data shows mixed signals as full-time jobs rise despite overall decline
Australia's employment landscape presented mixed signals in May, with overall employment declining despite a strong rise in full-time positions, according to analysis of the latest Labour Force dataRead more
Earn
Millennials face 'generational squeeze' as most vulnerable group in retirement
Millennials will be the most vulnerable demographic to face the "generational squeeze" in retirement, caught between supporting elderly parents and adult children while funding their own later years, ...Read more
Earn
Top workplaces for women in 2025 highlight progress in gender equity and inclusive leadership
Australia’s top workplaces for women in 2025 have been announced, recognising companies that are leading the way in gender equity, flexible work arrangements and inclusive leadership development. Read more
Earn
Employee satisfaction dips as Australian workplaces tackle retention challenges
Australian workplace satisfaction has declined to 78 per cent as companies grapple with economic pressures and changing work dynamics, according to a new report. Read more
Earn
Simplify your finances: The benefits of debt consolidation loans in Australia
In an era where managing multiple debts has become a common financial challenge for many Australians, debt consolidation loans emerge as a practical solution to streamline finances and regain controlRead more
Earn
Long-term welfare dependency declines despite rise in JobSeeker recipients
New research from e61 Institute has revealed that, contrary to popular belief, the number of people reliant on the benefit system in Australia has declined over the past two decades, despite an ...Read more
Earn
Best property investment strategies in Australia for 2024: An expert's perspective
As the Australian property market continues to evolve, investors are keenly looking for strategies that will yield the best returns in 2024. Read more
Earn
Innovative tax saving techniques for individuals and families
Tax time can be daunting for many Australians, but with some innovative planning and smart strategies, individuals and families can maximise their tax savings. Read more
