Recession in an away of low rates and lowflation the topic is particularly salient since last week, following an 18month review of its Monetary Policy strategy. The federal open Market Committee will be a revised version of its longer run goals and Monetary Policy strategies. We are honored to have governor board of governor here to offer her thoughts on the topic. After we hear from her there, will be time for questions and answers from the audience and panels to convene our discuss with ben bernanke, janet 12k0 and two marketers there will be more on that later in the program. In terms of questions, if you would like to pose a question, you can do so at email at events brookings. Edu. Before we begin, let me provide a short introduction to governor brainerd who has had a long career of Public Service in ack deema. She took office as member of the feds board of governors in june, 2014. Before that, she served as undersecretary of the u. S. Departments of the treasury from 2010 to 2013 and counselor of the secretary of treasury in 2009. I had the opportunity to have walked with the governor both at the Federal Reserve and at the treasury and can say that we are lucky to have someone in these role who brings such remarkable intelligence and dedication to and i also cant resist from mentioning from 2001 to 2008, the governor was here at brookings where she was a Vice President and the founding director of the Global Economy and development program, a program dedicated to addressing Global Economic challenges that is still going on today. So with that short introduction and our appreciation, i will now turn the zoom mic over to brainard. Thank you very much, stephanie, for that very kind introduction. Its a pleasure to be at working with you and with david west. Its an honor to also be followed by ben bernanke and janet yellen who pioneered the original statement as well as Julie Coronado and roberto pearly. And its a real pleasure to discuss the new statements that as unanimously approved by the f1c last week. By alignment with the changes in the economy the new statement will strengthen our support for the economy. The new statement breaks important grounds and will serve the country well. As we respond to economic repercussion of covid19. There were three rhetted features of the economys new normal that calls for this reassessment. First, the equilibrium Interest Rate has fallen to low levels which implies a large decline in how much we can cut Interest Rates in order to support the economy. That was abundantly clear in march when we were able to cut the policy rate by only 1. 5 before hit the effective lower band in contrast to previous decades when the policy rates would have been cut by 4. 5 to 5 . The reduced scope to cut the Interest Rate could increase the frequency and duration of periods when the policy rate is pinned close to zero. Unemployment is elevated and the inflation is below target. This in return turn risks inflation and compresses the scope for cutting Interest Rate the risk is a downward spiral were the scope for cutting the rate gets compressed lower, the lower bound binds more frequently and it gets harder and harder to move Inflation Expectations and inflation back up to target. S weve seen, jurisdiction second, underlying trend inflation appear to be somewhat below the commeas 2 objective according to statistical filters. The near decade of inflation persistent ply shorter than 2 creates the risk that households and businesses could expect them to change their behavior in a way that fulfills that expectation. And that in turn will complicate the task of Monetary Policy. While its hard to measure Inflation Expectations with precision, some market base and survey base indicator show signs of a downward drift. It is important to ensure that longterm Inflation Expectations are bell well anchored at 2 to achieve our price stability goal. And finally the sensitivity of Price Inflation to labor market tightness is very low, relative to earlier decades. Thats what economists mean when they talk about a flat phillips curve. It has some important advantages that allows employment to continue expanding longer without generating inflationary pressures which provide job opportunities. So people that might not otherwise have had them but pit means its harder to achieve our 2 objective on this sustained basis. In response, the new statement on goals and strategy makes four important changes. First, the statement defines the statutory maximum level of employment as a broad base, an inclusive siff goal of the longer run normal rates. The presumption that accommodation should be reduced prethe tivoli when the rate nears the neutral rate in anticipation of inflation thats unlikely to material risize. Instead, the decisions will allow the labor market to continue healing after the unemployment reach the 5 median estimate of the neutral rate in the Fourth Quarter of 2015. T has recorded a decrease of 3. 5 on the black unemployment righting and 2 in the hispanic Unemployment Rate as well as an increase of nearly 3 in the Labor Force Participation rate of prime aged women. It created a conditions for the entry of americans into the labor force. Beyond that, it had the changes that we are making in the new statement then in placed several years, its likely that accommodation would have been reduced even later. And the gains would have been greater. The new commitment to defining maximum employment as a broad base and inclusive goal together with our continuing commitment to consider a wide range of indicators may be particularly significant for the grupets that are most vulnerable to unemployment fluctuation. So it suggests the greatest structural challenges in the labor market. We are likely to be the first to experience layoffs and the last to experiment employment games during recovery. Those are more cyclic tiff for plaques and hispanics than for whites and observeable characteristics explain very little for the differential. That was one of the Key Takeaways from the fed listen sessions we held. For example, the chancellor of the city colonials colleges of chicago described how last years tight labor market was given his students the opportunity to apprentice with local businesses and jobs that might not historically have an open. Moreover, earnings from wages are particularly important for these groups who have large and persistent wealth gaps and derived a smaller share of their income from financial asset incl asset holdings, his business ownership. To address the downward bias associated with the proximity to the effect of band, the stadium announced state announced an averaging strategy that seeks to achieve inflation that averages 2 over time. Flexible, average inflation targeting. It is a consequence will change in consequential change in strategy. By seeking to limit inflation meansverages 2 , fait that appropriate Monetary Policy would achieve inflation moderately above 2 to accommodate a period when it has been persistently below 2 . I would expect the committee to accommodate, rather than offset monetary pressures. Flexible average inflation targeting is a pragmatic way to implement a makeup strategy, which is essential to arrest any downward drift in expectation. Target,formal average in theory, appealing there are likely to be communications and implementation challenges in practice, relative to the mechanical nature of such rules. Betterrast, fait is suited for the highly uncertain and dynamic environment in which policymaking takes place. That said, i see the commitment to undertake a few of the new a review of the new strategy in roughly five goals as a necessary complement to the flexibility embedded in that strategy. Is a new approach, it is pragmatic to review it after gaining practical experience over five years, as well as to get insights into an appropriate makeup period. Third, the statement highlights an important change in the committees reaction function. Whereas previously its out to medicaid aviations of employment and inflation from either direction, the committee will seek to mitigate shortfalls of employment from the committee s assessment from its maximum level. This applies implies the committee will minimize welfare and not unemployment preemptively withdraw support based on a historically steeper phillips curve that does not anrently in evidence, inflation that is correspondingly much less likely to materialize at high levels. Theistent with this, statement dropped language about a balanced approach. Ast might be interpreted calling for preemptive withdrawal. The statement codifies the key lesson from the Global Financial crisis that Financial Stability is necessary for the achievement of our statutory goals of maximum employment and flexibility. The changes in the environment that prompted our review also have important implications for Financial Stability. Historically, they steeper phillips curve, inflation tended to arise as the economy heated up, which would prompt the Federal Reserve to raise Interest Rates, which would tighten financial conditions broadly. Not see thatwe did in the past few cycles. Financial imbalances, rather than inflation, were elevated at the outset of the downturn. The committee may have to sustain the federal funds rate below for much longer, in order to push inflation back to target sustainably. Is along with resource utilization can do so to increasing risk appetite, reach for yield behavior, and in sentence for leverage. Incentives for leverage. It can lead to more slick call cyclical volatility. Crucial to useis tools as the first line of defense. In order to remain focused on achieving maximum employment and a 2 average inflation. With these changes, the committees new statement with us in a stronger position for inporting a full recovery employment and average inflation of 2 . Overall financial conditions are supportive, encouragingly the housing sector has rebounded from its initial decline, supported by low Mortgage Rates. In Consumer Spending has held up well, in part reflecting fiscal support. At the same time, the pace of improvements in employment in may and june, which was driven by recall hiring out of temporary layoffs, appears to flow. Front ine inflation july, inflation remains weaker than precrisis and is likely to take some time to return closer to target. Looking ahead, the economy continues to base to face uncertainty. Covidrelated uncertainty persists, the greater the risk of shuttered shuttered, and businesses and permanent layoffs. While the virus remains the most important factor, timing of further fiscal support is a key first, as was true in the phase of the crisis. With the recovery likely to face headwinds, it will be important for Monetary Policy to shift to accommodation. As we move to the next phase of Monetary Policy, we will be guided by the committees new shout. It will be important to provide the accommodations to usher employment to its maximum and then she achieve inflation that averages 2 over time. The consensus statement will frame the committees policy of liberation. At me conclude by expressing appreciation for chair powell and vice chair clarinet in leading this review. As well as jeff, mark, and david. Our liberations were enriched by Engagement Community members in every district of the country, as well as outstanding memos by staff and responses by outside experts. While the committee did not anticipate the challenges of the covid19 pandemic, and the review was launched the new statement puts us in a stronger position to support the economy. Thank you. Thank you very much. Very clear and distinct statement. We have a number of reporters on the line who have emailed questions and people others watching ken send questions. Quite a few of them have already. Im going to borrow from their questions, in some cases, paraphrasing them. Im not sure im going to attribute everything. Somethingff, he said people may have missed. What difference would have made had the statement and place earlier . Said its accommodation would have been withdrawn later and gains in employment would have been greater. So, the fed raised interest 20152016,mes over 2017. Are you saying that had the statement been in place, those rate increases would not have occurred . Is, i think, it important to note that these are consequential changes to our strategy and goals. Whereas previously we were deviationsmitigate of both employment and inflation, we are now very focused with regard to employment only on shortfalls. Whereas previously we talked employment ins on a way that was roughly associated with the normal rate of unemployment, the statement no longer references that it talks about the broad and inclusive goal in a variety of indicators to assess this. The statement also talks about the inflation goals goal that is defined in terms of average inflation at 2 over time, which likelyhat inflation is need to moderately seed exceed the 2 target for some period when it has been below that target. Those changes would have materially changed conversation among the committee, certainly , 2016, the early 2015 may be into 2018 period. Athink there would have been different concept of inflation and a sense that there was no need to preemptively withdraw or prepare to withdraw on the basis of an expectation of inflation to realizing on the basis of historical relationships. There would have been a recognition that there is a downward bias associated with that effective lower bound. I think these are consequential changes. They will change the way the committee deliberates. They would have changed the liberation earlier in the period, had all of these factors been well understood mr. Wessel just so i can paraphrase, in the past, when it looked like the Unemployment Rate was falling , then thenormal rate noninflationary rate, when it was getting close to that, that became an argument for raising rates. When inflation began to get close to 2 , that became an argument for raising rates. In a future deliberation, that will not be an argument easy to make my given the new strategy . I think you summarized it much better than i could, david. I think you and mr. Wessel i think you heard people say, this is great. Average inflation targeting, it means whatever the fed wants it to mean and no one else will know what they are talking about. It was no sense of how much above 2 you are interested in inflation going. There is no sense over what time you will be averaging inflation. Why did you decide to make it so vague and, is this something you think will be refined as statements come out about current policy . Ms. Brainard yes. Those are really good questions. Those are questions that you know from the minute the committee debated at length. Excellent staff papers and some excellent outside papers to help inform this deliberation. Is a kind of, this canonical tradeoff in Monetary Policy, right . Ae tradeoff between mathematical formula and the ability to adapt to ongoing realities is a longstanding discussion in Monetary Policy. Seems important, particularly important, to air on the side of pragmatism at a time when we are embarking on what is essentially a new approach. Flexible average inflation targeting as a pragmatic way to implement a strategy. Appealing,mal ait is there are likely to be communications and implementation challenges in crack this related to the mechanical nature of such rules. It is better suited for the context in which policymaking takes place. It will allow for some burning overtime. I do want to be clear i find it instructive to use formal rules as benchmarks to inform my thinking on policy. I will be looking at a variety of ways of thinking about this. Since fait is a new approach, it is pragmatic to review it after gaining practical experience with it. That is one of the great values of the fiveyear review, which is a natural complement to the flexibility in the approach we are adopting. Mr. Wessel would it be correct for people to assume because of this statement that the Current Committee believes when there has been a persistent undershooting of inflation, as we have seen, that you are making a commitment not to raise rates until inflation has at least met or exceeded the 2 target . So, that is speaking i really cant or prejudge how the committee might interpret that. Individual members will think about it differently. We have all said in that statement that it is likely appropriate Monetary Policy inflation to have moderately above target for some time after a period of being below it for some time. That is what that statement implies. In my own thinking, that will be an important consideration. We will be looking at a whole variety of developments, including information on Inflation Expectations, that is the simple meaning, i think, or implication of that kind of approach. Mr. Wessel can you achieve the full employment and price stability without substantial increase in fiscal stimulus . In terms of the particular circumstances that we face today and i touched on this earlier there was a lot of uncertainty. That continues to cloud the outlook, Downside Risks are continued to be important. I have been pleased by some of the recent eta on consumer isnding and, of course, it very good to see people going back to work, but we dont know whether that pace of improvement on the labor market is going to be maintained at the same rate. To manyry important households and businesses to have continued the support, just as it was important to them and make the early phase of this crisis. While the covid uncertainty is the single most important uncertainty, fiscal is, in my mind, a very important factor. Mr. Wessel you dont want to put a number on that, do you . Ms. Brainard thank you. I will hand it to somebody working in that realm. Reallysel you mentioned elevating Financial Stability to a new prominence. In the feds longrun goals. Ive been around long enough to remember when asset prices were something somebody else should worry about and Alan Greenspan once said something about irrational exuberance, the market flinched, they ignored him, and that was the end of Financial Stability considerations. In bernanke he a new division at the fed, of course. Iner what we went through 2008 and 2009. Thenew statement says that committees policy decisions reflect its longer running goals, its mediumterm outlook, and assessment of the balance of to thencluding risk Financial System that could impede the attainment of the committees goals. I want to give you a chance to expand on that. Two pieces. One is, right now do you think that the macro tools and regulators are doing enough to contain the risks of Financial Stability, given how low Interest Rates are and are likely to be . And secondly, are you suggesting that in the future the statement will give the fomc reason to raise Interest Rates if they think there is risk of financial instability . Ms. Brainard yes. Let me take those, maybe in reverse order. You are highlighting what is important. That is unlikely to receive as much attention. It is an important change that the new statement recognizes that Financial Stability is necessary to the achievement of axum employment and price stability. It is an important recognition. Evolution. It is an it doesnt necessarily flow from those same changes in the macroeconomic environment. That combination of a low neutral rate, flat phillips curve, and low inflation can lead to more cyclical volatility and asset prices. We note in the last few cycles setting aside, obviously covid is different the financial imbalances rather than goods and Services Inflation were notably elevated. Long period where Market Participants could expect low for long Interest Rates along with high rates of resource utilization, those are circumstances in which you sent to see risk appetite, reach for yield behavior. The creation of the division of Financial Stability, have put important changes in place. We do have the benefit of having developed a rigorous framework for monitoring the buildup of financial vulnerabilities, which nelly is familiar with. That is shared with the board and the fomc on a quarterly basis and published semiannually in our report. It is going to be an important consideration. It will continue to be. Additional important consideration, to speak directly to your question, is it is very important to see the boards active deployment of macro prudential, as well as standard prudential tools, as a firstline of defense in order to allow Monetary Policy to do the work it needs to do. So with regard to where we are today, i think it is extremely important in the supervised banking sector. Those buffers that were built up since the financial crisis surfaced served us exceedingly well. Tanks were able to continue lending. They were a source of strength. I dont think they should be paying out dividends. I think they should be hanging onto their buffers and continuing to lend. Of course, the important risks that need to continue to develop , macro prudential and prudential frameworks are also in the nonbank areas. As we saw in this crisis. That macro prudential and prudential set of tools continue to be, in my view, the first line of defense. The macro and prudential tools do not suffice or, as you have defended another a number of times, the rest of the board has not been willing to raise the capital buffer. Should we anticipate a time where the fed will raise Interest Rates and give is a reason, the Financial Stability concerns as opposed to the more conventional inflation and unemployment concerns . Ms. Brainard i do believe that Financial Stability considerations, rising imbalances, have been and will continue to be important parts of our committee discussions. Again, have a session devoted to that every quarter. They come into all of our outlook discussions, our policy discussions. For me the hope is that we can rely on strong macro prudential and prudential tools to deal with those. I think we got a lot of authority under dodd frank and it is important for us to use them. For precisely that reason. Ourwessel one of colleagues asked if you can discuss any implications of the new framework on foreign demand for u. S. Securities and for Exchange Rates . That theard i think transparency of our Monetary Policy framework and the very important evolution should piecese to be critical of some transparency and liquidity. Other characteristics of u. S. Financial markets that have been very important to foreign ,nvestors, i think it is also you know, very important that the committee was prepared to act very forcefully, very quickly to deploy all of the tools when the covid19 crisis struck. As you know, not only did we important intervention to restore smooth market functioning in our own markets, but we also worked with partners to reinstate swap facilities. We made those terms more attractive. And more suited to the current circumstances. The innovated. We innovated. I think those actions, as well as the clarity and transparency around a framework are some of the Important Reasons that Foreign Investors continue to look for u. S. Financial markets as dependable and liquid. Mr. Wessel seems to me that ta made thisri point, the decline in Interest Rates is global. The natural decline is global. Presumably, that should mean this should not put us out of whack with other companies. By signaling an easy Monetary Policy, are you putting the value of the dollar at risk here . Ms. Brainard i think that these asnds that i talked about motivating or framework, the low neutral rate, all of the research, and all of the experience suggests this is really a global phenomenon, particularly affecting many advanced economies. Are grappling with inflation. Many economies also, the ones he might spend most time exchanging with, also see this phenomenon of a very flat phillips curve. Of foreignse, a lot Central Banks, as well as we u. S. , grappling with a similar set of challenges in coming up with different responses, but all motivated by the same forces. Mr. Wessel are you confident you have the monetary tools to achieve the goals that you have set forward in the statement . Ms. Brainard i would say that of tools. Robust set the statement does make a strong commitment to using all available tools. That is a hallmark of our response to covid to date. That said, of course the statement is focused on our longerterm goals and strategies. Purchases are extensively tested in the last crisis. At the core of our response i think committee consistently concluded that negative interest attractivet have an cost benefit in the u. S. Context. It is clear from the meeting that yield targeting is in the toolkit. There could be circumstances where it would be considered to reinforce, akin to what the reserve bank of australia is doing. Youre not thinking about deploying it now, but it is in the tool shed. Others believe it could have a place. This comes from a reporter. What ways would you suggest making Forward Guidance around Interest Rates more explicit in order to complicate complement, not complicate the changes in reaction function . Are you thinking about ways to use for guidance to make the framework more effective during this period and things are so unusual . As was in the minutes from the july meeting, we did have discussions about ways we might refine policy. , i that we have concluded would anticipate we would return to the discussion of appropriate auditory policy. It is consequential, and my mind, that the new consensus statement will frame our policy deliberations as Monetary Policy pivots to accommodation. The committees discussion of policy at the next meeting and beyond be framed by the goals and strategies in this statement. I would not prejudge the timing and nature of any conclusion, but as you know from the minutes, Forward Guidance has come up in our conversations. In some ways it is a natural way to extend the policy space. We gained experience with thresholdbased guidance under chair bernanke and chair yellen. To discuss aatural of takingsible ways forward our statement. Again, i cant prejudge those discussions. Mr. Wessel do you see tweaking the Forward Guidance to be more specific or thresholdbased is a good idea . I can, we have had about Forward Guidance. Deliberationslicy there were discussions that would be natural for us to turn back to them, now that we have that framing. It would be natural, in my mind, to do that. Mr. Wessel another Reporter Asks that mark given the f effort on Financial Stability, will this affect how you think about the Bank Scenario analyses you are going to carry out later this year . How do you see that going . Ms. Brainard i think the stress tests are very important. Hat was true now itt, nearly 10 years has been particularly important in helping my thinking in assessing adequacy of offers. For various scenarios going forward. Think they will be very important. About howking important it is to attain buffers in order to be able to provide credit to the economy. I dont see that changing. I see that as a continued part. Mr. Wessel there has been quite a bit of focus on issues of Racial Equity in the United States. Of the things have come to the fore. There are people asking, what can the fed do, what should the fed do what are the limits of your authority, what are not the limits of your authority in thinking about the inequities between black households and white households in terms of everything from employment to Household Wealth . You mention in your statement that one argument is that the longer you allow the economy to run, with low Unemployment Rates and you dont preemptively raise Interest Rates to prevent a decline in the Unemployment Rate that seems to have a favorable benefit on minorities. Is that the extent of what you think the fed can and should do . Ms. Brainard yeah, it is a really important question. The four that within corners of the responsibilities given to us, our work can and should help racial inequities. That is very clearly evident in our responsibility in fair lending, in the reinvestment act, it is our responsibility under the dodd frank act. It is important in our research and data collection. I will highlight the distributional financial accounts, which are probably the best Data Available on the distribution of wealth among different demographic groups. Of timedevoted a lot and attention to analyzing that data. Acrossent disparities racial and ethnic groups. That has been important. Im happy to say we are reporting a Monetary Policy report. It is critical in assessing where the economy stands. That theo True Research and experience that we ,ave access to through our work our staff work at the board, but also our outreach very important to our Extensive Development network suggests the groups that face the greatest structural challenges are also likely to be the first to experience layoffs during downturns and the last two experience gains during recovery. We see those patterns of greater cyclical sensitivity. That is also a key take away from the fed lessons sessions. I think a commitment to defining employment as a broadbased and inclusive goal, together with that commitment to address a wide range of indicators, i think those things together are consequential in this area. People in there are congress that think they should be added to the fed mandate. Do you think this is a good idea . Takerainard i usually very importantly the mandates we received from congress. It is important for congress to make those determinations. Mr. Wessel as you know, sometimes people argue, look, the fat doesnt want to admit it, but it is increasing inequality because all of this asset buying, quantitative easing, drives up the stock market. Most stock is held by wealthy people. The fed is increasing inequality and it does not acknowledge that. When people say that to you, what is your response . Ms. Brainard i think the changes in the statement are significant. I think it is important to take a little time to digest those. They have important implications for this issue in particular. Enable the labor over a much more sustained period. We know that a strong labor market is the most important factor that brings some of these structurallychallenged groups back into the labor force, back into good employment opportunities, and creates opportunity for advancement. We also know, related to what you have said, that wage earnings are going to be particularly important for those groups. Had we know that . That we made publicly available. I spent a lot of time on it. I think the statement is a big change. Mr. Wessel i think that what people sometimes say is, look, if the fed cannot cut Interest Rates below zero and it is going to have to rely on eyeing lots of bonds, that that will push up asset prices part of the design and that will and evidently make inequality worse. You dont look at it that way . Ms. Brainard i think our framework is very clear. To eliminate shortfall from unemployment. Andned in broadbased inclusive terms and to get inflation back to 2 on the average level. Together things themselves i think are the key goals. How we get there, you know, that is going to be determined on circumstances based on but the goals are very clear. Mr. Wessel i wonder if you could elaborate on how you see the economy right now. I recall that when you spoke about the economy in july we were, i think, a little more pessimistic than the consensus. Unfortunately for us, might have been right. I wish you had not been. As you point out, it is a bit confusing now. You see car sales have picked up. The Housing Market is benefiting. Rom low Mortgage Rates Consumer Spending seems to have part or maintained itself. Of the just the tail end fiscal stimulus and we should anticipate things getting worse from here . How do we think about what is happening to Small Businesses one in 10 workers who are officially unemployed and those not working but not counted . Ms. Brainard those are the questions. To july,ight, relative i have been encouraged by the strength of Consumer Spending. We sell robust spending in june and july. It is now well above precrisis levels. We saw the housing sector post a strong rebound. Supported by historically low Mortgage Rates. On business investment, surprised to the upside. And financial conditions remain very supportive. But, you know, after seeing that improvement in employment in may markete, labor improvement appears to have been slowed according to some indicators. I will be watching that. Course, inflation, despite that bounced back, remains weaker than precrisis. Some timely to take to return close to our target, let alone meet our goal. Forward, it is a period of unusually elevated levels of uncertainty related to the pandemic and, in my mind, was to the downside. Forrry about the potential permanent closures. And permanent layoffs. A kind of damage that will get the individual level, but also to the productive potential of our economy. The goal is a key factor in my outlook. It will remain important to many Small Businesses to many families. It is a mixed outlook. Was, but with risk to the downside. Mr. Wessel i see. The government has done a number of things to support businesses to try and minimize the number they can wander altogether. There was, of course, the Paycheck Protection Program was aimed at the smallest businesses, which, whatever its flaws, i dont think we can blame the fed for those. For the bond buying you did firms that are big enough to issue bonds in the public market. Then there is the main Street Lending program. Im curious what you think about what we have learned about the main Street Lending program and how you respond to people who say ms. Brainard we did extend ourselves. Most of our facilities have a big effect by, essentially, being backstopped. That is true across the board. Most of them see very little usage. So, as you look across the board at most of our programs, in one or two you might have seen a period of usage, but then it drops off as indicators returned to normal levels. Street is going to remain very important as an insurance policy. We dont know how much how the rest of the years going to go and we dont know how the economic repercussions are going to look in the Fourth Quarter. Having that insurance policy is very important. ,anks have been very willing until recently, to extend credit. For some businesses, Capital Markets have reopened. For those on the cusp between issuance and banks, they have done that. I wouldnt look at any one particular facility and make a judgment. It is far too early. I would look at the mentality and, you know, are there things i would do differently on each of them . Absolutely. We all individually have a sense of what we think would be appropriate, but that is ok. This is a partnership. I think standing up a facility to reach main street is a very venture that the fed has done for the first time. Mr. Wessel and understand your point that many of these are facts. When you announced your link to buy witness about bonds or you provided municipal liquidity, one could see the markets heal. A number of state and local governments are able to borrow. The same goes for people i can borrow on Public Markets to Corporate Bond market. Im not see ic main street as that kind of backstop. I wonder on that facility if your preference would be to change the terms or not . Know,ainard i think, you in the report it as a backstop in the sense that we hear from a lot of banks that they still want to be making those. The businesses that they know well, they still have confidence and want to be making those loans. That is a good thing. I see it ase, yes, a backstop. They have registered for the program it might have brought a few borrowers they know it is there if they dont want their Balance Sheet in that way. Now, is main street a little bit the lower end, ppp . Yes, there is a grant element there. Which main street does not have. I think it is a good discussion to have going forward, whether it makes sense to provide some their,edit risk taking under certain circumstances at the lower end, potentially. I think that is a good debate to be having. Mr. Wessel i see. Future is aing the very hazardous occupation. I dont think there are very new people although im sure there is someone out there who will email me who 18 months ago would have predicted where we would be today. In terms of how the damage that covid and the response has done to the economy and our difficulty in turning to normal. That said, i am curious, looking down the road, how long do you think it will be until we can your goals achieved on price stability and employment . How long until we get back to the kind of full employment that we came close to before covid and we get inflation up to 2 on average . Is it two years . For years . Six years . Rest of my life . My dad died at 98, so the rest of my life is a long time. Ms. Brainard [laughter] how i was going to say i was going to say, hopefully a long time. I cant offer you a better forecast than anybody else. Probably worse. I will say, that is not how i think about policy. Some risks, some possible scenarios, the baseline x better. Looks better. The risk does not. I continue to think that it is important for Monetary Policy to shift from stabilization to accommodation. Sec thatave the first i believe incorporates 2023 coming round around the time. You will be able to see how the committee is thinking about that timeframe, in terms of its goal. Inflation has been persistently below target for onandoff, close to a decade now, with some exceptions. The passive guidance moves more slowly. Trajectory tends to improve more quickly and we have seen some really nice rehiring. Im continuing to hope that we will we will see this case of improvement on the labor market. I think it is important to stay the course on getting inflation byan average of 2 over time seeing some overshooting. Mr. Wessel im trying to understand what it means to go from stabilization to accommodation. In some sense it seems like the fed pulled out the stops. He got Interest Rates at zero, you told us theyre going to remain there for a while. Youve bought a lot of bonds. What more could you do that would move from accommodate stabilization to accommodative, which implies pushing growth up . Ms. Brainard in my own thinking, it is really about the goals of our tools. And what we are orienting to. You are right that in the early months of covid, orchid functioning was extremely designnt focus of the side of some of the things we have been doing. A very calm consequential statement that will help us both think about the goals, in terms of the way we defined maximum employment reactiontion, and the to get us from here to there. I think that reorientation is important. Mr. Wessel but that, we are out of time. I want to thank you and everybody who ask questions. I tried to ask all the ones posed. If i missed one or two, we know and i will see if i can get the governor to answer them later. I think what we will do now is take a brief break and we will be back with our panel with ben bernanke, janet yellen, and julia coronado. Thank you very much, governor. Ms. Brainard thank you. Mr. Wessel we are back. Im david wessel. We are now going to turn to our conversation to thinking a little bit about how the implications of the feds new statement. I want to thank our technical people for making this so seamless so far, knock on wet. We know that sometimes events can interfere. Hopefully that wont happen today. By plan today is, im joined ben bernanke and janet yellen, former chairs of the Federal Reserve and my colleagues at brookings. And roberto and julia, both of them have worked at the fed but are now in the private sector. Cap and people understand what the fed is doing and giving the fed advice, whether it wants it or not. I want to acknowledge that julia has been a supporter of the economic studies counsel at her claims. At brookings. We are grateful for that. If you are online and want to pose a question, that is fine. Brookings. Can email somebody will send it to me. That, i would like to start then, with you if i might. You if i ben, with might. Began the notion of having a longterm statement of policy. Im curious whether you think , with Interest Rates so close to zero and the fed cannot do a lot right now, but this strategy increase the potency of policy and does it matter that they were so lacking in specifics about how much of a overshoot they will tolerate, how long they are going to average inflation, and what tools they will use to get there . I think it will strengthen Monetary Policy. There is a lot of evidence that makeup policies, or you makeup for a shortfall like overshooting creates a longer dynamic. Markets expect everything to stay easier longer. That adds accommodation, even at zero. Es remain the simple twist of fate which is the new policy is very similar to something i proposed called the temporary price double target. Trying tothe idea of average inflation over a period of time. I did some work with michael alie of the fed, we looked at policy that averaged looking back year. So that if inflation was below target for year, kept it above target long enough to get actuate two year average. We found that made some difference, even if in our simulations, even if only markets and not the general public understood what this was about. Lower for longer policies are effective. I am sure janet will talk about this, she has advocated this as well. It is one way to get around the zero lower bound. By having an upper i. S. On inflation when you are away from zero, you hope to keep Inflation Expectations anchored around 2 , which gives more space in the long run. Inflationtions assume expectations were anchored. That is not always true. This will help do that. In principle this approach will create a little bit more inflation and give a lot of more space to policy. It is true that the way this has been laid out, it is not explicit. They dont talk about what the period for averaging is, of how quickly you get there and so on. I would point out that the statement that they have agreed is ais it constitutional statement. It lays out general principles, does not give specific amerco quantities. There are numerical quantities. There are things that can help us understand better. Number one, i expect the fed will come out with explicit lower guidance that will tie the policy either to time or the state of the economy, perhaps at the level of inflation. That will give us some sense of how they envision meeting this standard. The other quantitative criteria one of the reasons for doing this is to keep expectations close to 2 . We dont have precise measures of expectations, but i would think that monitoring Inflation Expectations, making sure that they are close to 2 , is a constraint that will quantitatively help us assess whether they are meeting this goal. I dont have much to say about tools. They have reaffirmed quantitative easing in Forward Guidance. They talked about other things like yield caps and negative rates. The basic principle of central banking is, you dont speculate about things until you are ready to use them. Particularly about you, i wouldnt take the mixed message as ruling this out. Its something they might want to do in the future. There are tools that would be helpful to reach this target in the longer term. That we end by saying are in a very special circumstance that the covid19 recession is different in many ways from a standard recession. And i dont think i dont think it is inconsistent with things ive sat in the past i dont think Monetary Policy is the tool that is going to get us out of this recession. Number one by far is going to be the Public Health situation and getting that under control. Fiscal policy also has a big role to play. Monetary policy can be helpful, but given this set of circumstances, it is not going to be the most important player in getting us back to full employment. In yourel as i recall address and the work he did with kylie and robert, he said the fed has sufficient tools provided that the eight of interest was somewhat higher than we leave it is today. Mr. Bernanke thats not quite true. And the feds official official in the projections that has the natural rate of interest around 2. 5 . My conclusion was that with Interest Rates between 2 and 3 that the tools we have can get is pretty much back to where we were before the constraint was binding. That is a different situation from now, what you can think about now is for the time being the fact that people are not spending because they are staying home means that the is curve has been pushed down. The neutral rate is lower than normal. So, my results from the lecture may apply in the longerterm, but right now i think that Monetary Policy doesnt have by itself the power to overcome the effects of the virus. Mr. Wessel thank you. Governor brainard talked about how this new statement would have changed policy in the recent past, including the years during which you were fed chairman. Im curious whether you see at the same way . Would it have made a difference if this had been the fed statement when you work raising Interest Rates in 2017 2018 . Ms. Yellen i think it wouldve made a small difference. I dont think it wouldve made a huge difference. Our forecast at the time we began to raise rates was that inflation was going back to 2 over the next year or two. The Unemployment Rate had already declined to levels i believe we thought were normal in the longer run. As expanding beyond the natural rate of unemployment. We wanted to be somewhat preemptive. Us having our foot firmly on the gas pedal as things were getting back to normal with respect to inflation. We thought it appropriate to take our foot off the gas pedal. Tois by no means the case slam on the brakes. Another 50 point increase in 2016 that was certainly not the expansion and even with the later increases that chair powell had, the markets continued to improve. Say if ouris fair to goal had been to overshoot 2 it would havehaps been a little longer to start the process of raising Interest Rates. Truth this might have made a difference, but i do not think it would have made an extreme difference. My question is based on transcripts that people that want to raise Interest Rates in the past have said, look, my projection of inflation is that we are heading over to percent lookingt tighten at the data on unemployment and the use that as an argument for tightening policies. Do you think this will weaken the argument . Willellen i think it weaken the argument because the statement is very clear. Nowcommittees objective allowa long period is to encourage anto that overover time so 2 inflation is achieved. Argument is to look outside the labor market and will be headed to two thirds quickly. We have to take a preemptive approach. The statement is pretty clear that the committee intends to take to overshoot 2 inflation, but also to take a less preemptive approach to look less at the tightness of the labor market as something that is a reasonable forecaster of where inflation is heading. It embraces the idea that with the flat phillips curve and with a great deal of uncertainty ofut what the natural rate unemployment is, they should not begin to tighten policy just based on the fact that unemployment is low. They actually need to see something happening with respect to inflation moving up before acting and with that in the statement, i think it will make some difference in terms of suppressing the arguments. Before i return turn to roberta and julia, you are both former professors. Mr. Bernanke incomplete. Ms. Yellen i agree that it is incomplete. Of aay in terms constitutional document setting goals and objectives, i give it an a. I think they came to an excellent conclusion. They ran an excellent process. They still need to translate this into something more operational. They need Forward Guidance about passive rates. One thing i would point to that impressed me that i think is important is they did obtain unanimous support in this committee. T is the very significance revision of the fed strategy with respect to Monetary Policy . And when you think about what they are saying they intend to theyhey are saying that whend many years from now the labor market is strong and inflation is moving up, to allow it to overshoot 2 . That they wanted to overshoot 2 want it to overshoot 2 . It is entirely possible when that time comes. When the pandemic is long in the past and the Unemployment Rate has drifted to very low levels, with inflation at 2 , much of the participants will wonder, are they going to did they mean they are going to keep Interest Rates that low . Credibility is important. You could say, why not promise now . With theruth is, committee there will be new members who certainly have the option of making up their minds when they are appointed what they want, and even participants who are part of the process now. You cannot bond their future decisions. To makingt commitments is to put that statement out and say they have very broadbased support. I think that was true of the original version of this statement that we adopted in 2012, it was all but unanimous support, and it plays an Important Role in the communication and creates credibility and the commitment. That is important. Recognizingy, explicitly in the statement that we are in a new world with low rate,at the neutral real that that would be dangerous and have to be countered to a makeup strategy. The change in the wording of the objective. Atike the shift from looking unemployment at maximum levels to shortfalls. Means as far as they are concerned, they will lower the levels of unemployment. Economy, for lower income groups, and we need to see something on the inflation side to interfere with that process. All of that are good changes in the statement. Mr. Wessel what i meant mr. Bernanke what i meant by incomplete, i need to see more action. Butink the fed is credible, there such thing as institutional reputation. You want to make promises. I think that the credibility is a little less of an issue than some people think. Roberto, is the market convinced that inflation is heading to 2. 25 and we have solved the problem . Mr. Perli no. That is a problem. I think with the fed did look, i agree with both debbie and janet. Creativedown to how you are, so lets give them an a. Hat they did was necessary absolutely necessary. Resolve the think latest estimates coming out, plunged predictably. The Inflation Expectation and go a little bit , you see that those dropped 40 basis points back in spring when covid first head. They have not recovered. They have not recovered the , if you believe those estimates. The destination, the ultimate destination is the same place that japan has been and where europe has been for several years. So what is next . I think they deserve praise, anything you want, because this is the most important issue we can think of. I think from the point of view of succeeding, i think what they have not done is they have not told people exactly how they plan to achieve this higher inflation. What we know is that rates are going to stay low for a long time and Forward Guidance has not been shaped yet, but they pick it will break soon, but those are the main tools that affect in the past. Taken out of the great recession, i think in a very good way, so i think the market forbe a little bit forgiven now until the fed articulates a full plan for how to get there. Mr. Wessel julia, how do you see it . Glass half full, glass halfempty . First, i am going to register for class. I want to highlight that one of the things that i think the f1c that they did that is so important as they updated how the economy works. To officially acknowledge that the neutral rate is lower, that that has implications for the conduct of policy, but the phillips curve is flatter, and that Financial Stability is a more structural part of the world that we live in and that the labor market is more elastic than they previously believed it to be. All of these are really and i will say but in the last cycle, there was sometimes a disconnect and how the fed talked about its forecast inflations and how markets the Market Participants did. To update that sort of official investment of how the economy functions in this world and commit to reevaluating that every five years, i think that is the best credibility. That may not be something that we see right away today, but over time, i think that would be a more dynamic reaction function that is flexible to the facts on the ground and i think that will lead to better policy outcomes that meet expectations over the cycle. Not immediately, because there is something missing on the inflation target. I will also add that it is not just about inflation. I think we are already seeing review. T of this policy we had already gotten a lot of the early kind of hints and guidelines of where we were going on this, and here i am going to highlight as a tool and the understanding of the tools and how to deploy them has already borne fruit in the covid recession. For example, one of the things that chair powell and governor highlightedlready in speeches before this recession was that they are more comfortable with proximity to the zero value of the now conventional, the Balance Sheet policy is now a standard part of the toolkit. Not something to put on the shelf and break glass only if needed, but that it will likely be deployed in the next ce conjunction with Interest Rates and Forward Guidance in a harmonious way, stopind of this start and pattern that we have seen before. And that we should go early and aggressive, and that is exactly what they did when the crisis hit. And what they effectively anieved is they presented economic crisis and a Health Crisis that was global in significance, so from becoming a financial crisis. Anhink it is not insignificant achievement in labor markets, although i think appreciation of tesla anymore than you can, but the fact that markets are functioning, credit is flowing, the fed is deploying these tools. Learning the lessons of the past is already making it will lead to a better outcome. The fed cannot fix everything, but it can prevent worst scenarios from taking hold worse scenarios from taking hold and they have certainly done that. Mr. Wessel it is jarring to find ourselves in a position where Central Banks around the world are doing everything that they can to raise inflation. It does not seem to be working very well, or not as well as they have liked. So how do they explain that . What has changed in the world that has made it so hard that for something for so long, we have tried to do the opposite . Mr. Bernanke the change is the motivated change in the statement it is structural. First of all, the lower level of natural Interest Rates, which is partly due to new rates and low inflation in an enforcing way. In the united we talk about this, but we kept it pretty close to 2 . And Inflation Expectations are a little bit higher in europe and especially japan, but we also get toat if expectations a very low rate below target, close to zero in japan, that that is very hard to break. Itse circumstances make difficult. It could be that you need fiscal policy or other policies as a transition to get you to a point ande Inflation Expectation the neutral rate are high enough. But the market policy can be playing the role that it played in the past, but clearly to get yourself in a japan trap type of situation, it is very hard to break out. I certainly cannot size the bank. F japan for lack of effort they have certainly been very vigorous in their efforts, so that is not the problem. It is the structural issues we have been talking about. Thewessel what about Financial Stability consequences are running low Interest Rates and driving up prices . I do worry about the Financial Stability implications in a longterm environment of low rate. Connection, we have to pound that has have low rates now for decades and i do not think you are seeing any real Financial Stability problems, the United States, the period of low rates, which was intended to support Housing Demand touched off a bubble in housing prices, which began to lead a life of its own as lower rates begin to rise. Bubblesignificant asset that led to a financial crisis. We have, even through this recovery, seems some areas that are bubbling also, not the same as the Housing Market. Corporate borrowing, you see a huge deterioration and standards. , borrowing in commercial real estate. Aboutk you have to worry behavior and touching on asset bubbles in this world. We had something on that in the forinal consensus statement 2012. Emphasized Financial Stability considerations before. But as others have said, it is certainly not the desire to be using Monetary Policy to address global and Financial Stability. Oncerns if they get out of control, it could cause a financial crisis that undermines the attainment of all of the feds goals. Ideally, you would use macro provincial tools and regulation, but the truth is that in the United States, we do not have many of them. There are countercyclical Capital Buffers that apply only to the largest banks, the stress potentially could lead to the building up of Capital Buffers. But this only applies the largest banks, not to shadow banks. I think there is a lack of macro provincial tools especially, if we think we will be in this environment, it seems likely that there will be low Interest Rates as far as the eye can see. Mr. Wessel roberto, where do you come down . Do you think we are creating an asset bubble here . I think it is probably not the right time to be thinking about Financial Stability when you are in the midst of the crisis. You have to resolve it anyway you can. You use all the tools that you can. Think there has been a terrific job in terms of the time limits, absolutely terrific. Some of the consequences are still worth thinking about. For example, the turning point in the market was not when the started buying massive amount of structures. Of treasures. Buy said they were ready to tribunes of Corporate Bonds, also across the financial sector, so that was really resonated with markets. Said, if a, if things go around, if things go wrong, we will take this off your hands. The consequences of this marketone, the financial and the stock market are increasingly dependent on fed policy, and number two, talking policy isuality, the probably incentivized on inequality as well. Time today to start addressing this problem, but at some point we need to talk about it because we always say, ok, when the crisis is over we will think about it, and we never do. It is something important to worry about after this is over. Mr. Wessel when you look at the outlook right now, are you about the risks to the downside . And the limits as to what the policy . Do and the absolutely. i think what we have done is allow this virus to community it is noradicating longer an option and we have to live in a socially distanced world. What we are seeing in Company Reports and some of the the labor market and the nature of layoffs that we are seeing, we are seeing a more normal recessionary dynamic to cold. Originally, without this would be temporary. Back to normal. We open everything becca. And we are just really careful we open everything back up. And we are just really careful. Wreaks havoc on Small Businesses, anybody in the Leisure Hospitality or travel industry. It changes the way we do business. These are deep, structural changes. We are just starting to see that really manifest itself in Business Planning and hiring and investments. There are always winners and losers, but it does mean misplacement and change. Displacement and change. We have to reallocate across employers and sectors or frictionand that is a that we have to resolve. That quick back to normal scenario does not look possible. Meanwhile, one worry i have Monetary Policy is they have been so effective in shortcircuiting the transmission of these real shocks in the market. As one used to serve signal to fiscal policy makers. I almost worry that fiscal policy makers have become too complacent because our kids are so well supported because markets are so well supported. It is huge. We are looking at a huge and supportincome for Small Businesses, and it will have consequences. But it will show up with a lag and we do not have perfect indicators for this. Yes, i am absolutely worried about those things. By the way, we have not even mentioned the idea of a second wave in the fall, which many epidemiologists say we should anticipate. That would lead us to hunker down and limit activities, and makes it harder for the economy to recover. I concur with the governors outlook, and it is a little bit jarring against that backdrop. Ben, there are a couple questions. Is, shouldnt the fed raise Interest Rates and lower them in bad times . Shouldnt they be preemptive . If the recession had been more from financial excess than too much inflation, arent we risking the same mistake now . Are we going to regret it on the road . Raisernanke the idea to rates so that you can cut them does not make logical sense. It means that you should hit yourself on the head with a hammer so that you can feel better when you stop. Noting rates too soon is going to help you in the long rateso you need to adjust in a way that is consistent in moving towards your goals in a consistent way. Business cycles are asymmetrical and that justifies some of the asymmetry also in policy response. On the Financial Stability , i have all people should recognize that financial instability Financial Stability is critical to the economy. The United States is not always done enough. I think we should do more. Ofm concerned about the idea using Monetary Policy, not for any religious reason, but basically that the connections while certainly there, are so risktain that you significantly slowing the economy to really unclear benefits. There are so many counterexamples, like when janet mentioned Interest Rates in japan being close to zero without any effect, and it is very hard to find examples globally. I am sure someone will come up with one, but it is very hard to find examples where policy has goals andeviated from related a Financial Stability problem. Fed to pop bubbles, but they tend to overshoot. Principle, yes, obviously very important to deal with Financial Stability risk. It is imperfect. Prevention tools are imperfect, but it is worth knowing that we have made progress relative to 2007 and we take it much more seriously. We have to keep pushing. Need toike janet and i let policymakers know that it is about have incredible importance. We need to think about what can be done to make markets less dangerous to the economy. I agree that Financial Stability is a central issue. I am skeptical that market policy can be used in a consistent and effective way to deal with these problems, and ms. Brainard said other tools that are more focused on the problem at hand. Youve been sitting on a committee that has been advising the governor of california. There is a question about how worried you are about state governments and their solvency and ability to provide Public Services given where we are in ms. Yellen i believe it is a budget shortfall this year. We have been very much hoping for some support for the federal government from the federal government that would avoid very drastic cuts to Public Services and cuts in employment. Workers. C state i believe the center for budget is that the state i am not worried statemunicipal debt or states alle these have to balance their budgets and theyre all slashing spending in order to do that. I think the economy adds concerns to what julia described. There seeing the cut off at 600 a week in supplementary insurance benefits. Personaltantial cut in income, i think it amounts to Something Like 16 billion a week. Are going to pretty soon almost all of that we have spent, we are going to see cutbacks in spending that we can the economy that weekend the economy. Governmentsd local we will see cuts in state and local spending. Roberto, one of the things we see in congress i used to think that we had to worry about the federal debt. No one seems to be worried about it, even the bond market. Why is not . Those blatant worries that Interest Rates will go up and we will have to panic inducing big about it panic and do something about it . Japan. Li look at i think the way we look at it is that today is the reason that the government has to issue this. The situation is bad. Loss because of covid19, because of the shutdown. Of lower situation Interest Rates, not higher Interest Rates. In the longer term as well. Thinko not particularly that this is the time to worry about the debt. I am not surprised that market will behind sprite of the larger issue will be higher in spite of the larger issue. This is the time to borrow. Future, we may see rates point, but at this there probably problems to worry about. Mr. Wessel what would make you happy if the fed did it in the months . To nine what do you think that they have to do specifically . Ms. Coronado i think i would tacklingsee more of a of the tools and the integration and focus of Interest Rates to see that how they transmit and interact. I think this is an emerging area for the fed, and the statement still says, our primary tool is Interest Rates. But is it . It is quite a Balance Sheet policy that has been central to their current cycle and will continue to be. I would like to see more of a thinking through communication of how those things set together, where they trade off, and some more concrete guidance. I feel like in terms of thinking about how the fed is going to onrify its statement Interest Rate policy and bond purchases, the bond purchases are going to be far more thanficant for markets saying were going to be at zero until inflation is 2 . Be ng are you going to what are your metrics of success . I think that is going to be something we will be watching very closely. So that is a primary thing. I found governor brainards discussion i completely concur there central and we have to think about how we address it. When governor brainard talked about extending supervisory and regulatory tools that can be brought there, i think this is going to be a really important obviously that gets political and we have to interact with the political environment, but i think that there are things that can be done that give the fed better leverage to pull because they didhat strengthen. Governor brainard talked in length about these concerns. They are very important. There essential to the business cycle. Fed needs more tools on that front to address those, and i would like to see an exploration of what those tools will look like. Ben, when you adopted the inflation target, fed was not in the usual it was not innovating as much as adopting what other people had done. I think there is a sense that the fed has done Something Big sure,tching i am not it seems rather awkward, but i wonder whether you think this is globally significant . Earlier,nke as i said this is a contingent policy. Has to do with the war with where the world is today. The world is in a situation where neutral Interest Rates are very low. Expectations because of history are very are below target. This is probably a better than the or response bygones be bygones approach, which was characterizing the inflation target. I was being facetious when i said and complete. When i said incomplete. I think it is good work. It is a positive step. But if the world changes in an excerpted right, unexpected way, this may not be the option anymore. For now, i think it is an improvement. I agree with julia. They have to work harder to see how the different tools coordinate with each other. How they are going to think about Financial Stability, how they are going to add firepower and other dimensions. I do think that going towards policies that create a better environment and trying to assure that inflation stays close to 2 , those two things are meaningful improvements and, while again, Monetary Policy is not going to cure coronavirus, this will set them up to be more effective in the world that we have going forward. People have been talking about how critical the Public Health situation is. I think there are possibilities where vaccines and other things could bring this to an end in the next year or two, and in that case, i think we could see more rapid recovery and those tools will become more relevant at that stage than they might be today. Weve been talking forwardterest rates, guidance, the curve control, is that it . Other things the fed could be doing were not talking about . End, theyll the do the same thing. All do the same thing. For aake them even lower longer time. But there is a, reason to do this. Businessesl tousle to borrow today instead of tomorrow the fed wants Small Businesses to borrow today instead of tomorrow. Is concern that i have this is maybe a little less powerful. Something different maybe don e. That they did a bite of the coronavirus is going to territory they have not touched before, like Corporate Bond bu ying, or at least promising to buy assets. Policy after all, what the fed did is took money and confiscate it and. Everaged it for the purpose today,not be used as of maybe there are ways to explore further interaction between the fed and the government. We are exploring interactions because Interest Rates are not rising because the fed is buying a lot. I think we are going in the direction of more integrated policy and coordinated policy between fed and congress and other branches of government. Of course, it is fraught with issues. Independence and other things need to be talked about. I think it is for those other possibilities. The way the law is today, that cannot be done. Plausibleractions are without changing the lock. Mr. Wessel that scare you or make sincere sense to you . Requireen it would congressional reconsideration. This is something that most Central Banks actually have. A broader range of assets. Are think in a situation we in now, fiscal policy is necessary and plays an Important Role. Fedink there is more the can do. I would explore the tool kit, but we need fiscal policy. Mr. Wessel ben, last word. Do you think the fed should be innovating different tools . Mr. Bernanke i think it is good to be creative. To zerorporate still go corporate rates dont go to zero. I am not necessarily demanding these things, but i think given the environment and there are the issues that roberto raises about independence, so i am not endorsing any particular tool, but i think given the Research Resources that they should be thinking about alternative ways to provide stimulus if the fiscal authorities are not able to do their part, so to speak. Buttivity is one thing, Central Banks are serving as the duchennes, so there has to be a balance between those two instincts. Thing. Li one i agree with everything he said. Most of what i know, i learned from you. I think that was very interesting. Mr. Wessel i want to pick up on one thing before we close. Outlook was slightly more positive than other people. Confident well find some medical solution. Am i misreading you . Mr. Bernanke i think you are. The data because i do not think we will get out of this until the Public Health situation is under control. Full stop. One scenario would be that the vaccine or other interventions do lower the risk and that would be important toward economic recovery, as well. Thank you all for joining us, into overview posed those of you and to who posed questions, i tried to get to all of them. I hope everybody got a chance to post their questions. This was a lot of fun. You can watch the replay on our website and you can pick it apart at your l today, a virtual discussion on the campaign 2020 president ial campaign. Live coverage begins at 6 00 p. M. Eastern on cspan. Today, President Trump holds a Campaign Rally in pennsylvania. Watch live at 7 00 p. M. Eastern on cspan, online or listen live with the free cspan radio app. Next, a look at the u. S. Mexico trade agreement. Beyerbrady and don spoke about the event. Topics included the impact of the coronavirus on the Global Supply chain and ecommerce. This runs hour. Hower. Good afternoon, depending on where you are listening from
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