He warned of the negative impacts of long and deep recessions but express confidence in a few years the u. S. Could return to Economic Prosperity once the virus is under control. His remarks came during an eventood hosted by the Peterson Institute institute for international economics. Good morning and welcome to the Peterson Institute. Im adam, the institutes reserv president and it is my pleasure and privilege to, the honorable serv Jerome Powell of the Federal Reserve. Manyved as of you know obviouslf jay and his service. I just want to remind people that he previously served under thegeor secretary on the financl his jo institutions of the treasury market, and between that andd the board ofde governors in 201, he was a visiting scholar at the policy center working on federal and state fiscal issues. Atd to a time when fiscal polics asanybod much or more in the forefront then mullet Monetary Policy it is very hard to imagine that we can have anyone better than jay powell. Thank you for coming back to the Peterson Institute. Thank you very much adam, it is great to be i haveve look forward to our discussion. The coronavirus has left a devastating human and economic toll and its swing as it has spread around the globe. This isonde a Worldwide Public Health crisis and Health Career workers have been the First Responders showing courage and determination and earning our dn lasting gratitude. Legions of other essential workers who put themselves at risk every day. As a nation, we have temporarily withdrawn from any kinds of economic and social activities to help slow the spread of the virus. Some sectors of the economy have been effectively closed het since mid march. People have put their lives and. Livelihoods on hold making enormous sacrifices to protect not just their own houses but the health of their loved ones and their neighbors and the broader community. While we are allll burden has fallen most heaveneny heavily on the least able to bear it. The scope and speed of this downturn are without modernrn precedent, than any recession since world war ii. We are seeing a severe decline in Economic Activity and employment. Already, the job gains of the last decade have been erased since the pandemic arrived just two months ago, more than 20 Million People have lost their jobs. Fed survey being released tomorrow reflects findings similar to many others. Among the people who were working, almost 40 of those and households making less than 40,000 dollars a year had lostcs a job in march. This reversal of economic has caused a level of pain that is hard to capture lives are offended in the great certainty uncertainty about the future. This downturn is different from those that came before it. Earlier in the postworld war ii period, recessions were sometimes linked to a cycle of inflation followed by o ftthe lower inflation levels of recent decades have brought a long expansions, often accompanied by buildup and balances overtime. As sick prices that reached insupportable levels. Ectofor instance, important secs of the economy such as housing that boomed unsustainably. S tathe current downturn is unie there in that it is attributable to the virus and states two steps to eliminate there was no economy threatening bubble to pop, and no unsustainable to bust. The virus is the cost, not the usual suspects. Something to keep in mind whatk we respond. Today i will briefly discuss the measures taken so far of the economic effects of the virus and the path ahead. Governments around the world havehave responded quickly withh measures to have lost income and businesses that have either rcefclosed or n a sharp drop in activity. The response here in the United States has been particularly swift and forceful. Provitoday, congress has provid roughly 2. 9 trillion dollars and support for ofhouseholds, businesses, Health Care Providers and state and local governments. About 14 of gdp. While the coronavirus economic sharp appears to be the largest o record, the fiscal response hase ha also been the fastest ad largest response for any post fl war downturn. Forc pardon me. At the fed, we have also acted with unprecedented speed and force after rapidly cutting the federal fundss adrate close to zero,o,faci we took a wider arrf additional measures to sell the date the oflow of economy which canst orbe grouped into four ar. First, outright purchases and se and Agency Mortgage securities to restore functionality in these incrediblet markets. Second, liquidity and funding discount including s, windowbank measures, expended sb lines with foreign Central Banks and several facilities to support smooth functioning initt many olthirdds with additional backig from the treasury, facilities directly support the credit to households, businesses and state and local governments. Fourth, sup temporary regulatory attachments adjustments to and allow banks to their Balance Sheets to support household and business customers. If the fed takes actions such as these and only extraordinary circumstances like those we face today, for example, our authority to extend credit directly to private non financial businesses and state and localecre governments exist only in the usual an exigent circumstances and with the the secretary of treasury. When this crisis is behind us, we will put these emergency tools away. While the economic response has been both timely and appropriately large, it may not be the final chapter. Givenant that the path ahead is both highly uncertain and hasis significantes downside risks. Economic forecasts are uncertain in the best of times and today the virus raises a of questions. Canhow quickly and sustainably brought under control . Can you outbreaks be avoided as social distancing measures last . How long will it take for of ne confidence to return in normal tourism . Will be the scope and timing of new therapies testing or vaccine. The answers to these questions will go a long way towards timing and pace of the economic recovery. Since the answers are currently a noble policies will be ready ready to be arranged for possible outcomes. Thee today has provided a measure of relief and stability and will provide some support to that ded recovery when it comes. The Coronavirus Crisis raises longer term concerns as well. The record shows that deeper and longer recessions can leavey behind lasting damage t productive capacity of the economy. Avoidable household and business insolvencies can weighe on growth for years to come. E. Long stretches of unemployment can damage workers careers as their skills lose value and professional networks dry up, and leave families and greater debt. The loss of thousands of smallld and medium d sized businesses ay across the country would destroy the lives work and family legacy of manyn it comes. Businesses and communityncipal leaders. It of would limit the strengthf the recovery when it comes. These businesses are principalre source of job creation,nvestmend something we will need sorely as peoplee seek to return to ofp work. For a longer session, ament recovery can further limiting resurgence of jobs as well as the growth of the Capital Stock in the pace of technological advancement. The result could be an extended experience of lower productivity growth and stagnant incomes we ought to do what we can to avoid these outcomes and thatas mayse require additional policy measures. At the fed, we will continue to use our tools to their fullest until the crisis is passed and economic recovery is well underway. We call though that the fifth has landing powers, not provid spending powers. Along from thecros fed facilityn provide a bridge across the recoveryterruptions to liquidity, it will help manyqu bar owners get through idtheaddo crisis. The berecovery may take some te together momentum momentum. The passageerm of time can turn leaves liquidity problems intorecovery. Solvency problems. Additional fiscal support can be costlyone but worth it if it helps avoid long term down mitch and leaves us with a stronger recovery. This tradeoff is one for ourfor representatives who wield. Powers of taxation thank you again and i look for to our discussion. Thank you mister chairman. Ca i would like to start where you started. G th you for long time, and particularly since becoming chair,ndem spoken about the getting distributional aspects to bring the economy up and the importance of until the pandemic hit, we werem gettinges very close to somethig that looked like genuine genuinely full employment growth. As you pointed out, it is thoset least stable financially to bearnow. This burden who are beg hit right now. Goingempld . Forward, do you sees ho possible to get back to the full employment we had. Youve mentioned scarring of workers. Lo does quick action now and benefit us in terms of longer term Unemployment Rate . Wh en palso, in the past from to sometimes when people talk about you did not use the technical term, but the long term damage from recessions to workers and business, its been a two a street. People say we cannot come up, we cannot get the unemployment down because there has been yeas scoring, whereas with the fed, theyre demonstrating that you should thisexperiment how low yu can go with unemployment. When we get through this crisis, how do you see the fence rolled up in terms of its mandate on unemployment . First let me say, it was a period to watch unemployment decline and not seeed declining and either wage or Price Inflation move up. I think weve learned something very fundamental about our ability to associate l unemployment. I think thunemployment with inflation or other imbalances. That is a lesson we will be carrying forward. It hasard. Also been frankly we were over the course of the last few years with our ev weve madeents a series of 14 different events and engaged with different communities allor across america, including loan communities. We heard this was the best labor market and 50 years or in peoples lifetimes. El there are strong advice was please the keep it going. We are feeling opportunity we havent felt. They did not feel the first seven or eight years of the expansion, but they began to feel it in years, nine, ten, and 11. It was a great feeling and i think p ainftwo months ago we wt looking ahead at more of that and thinking further healing, further addressing these issues. Painful tocularly see all of that put aside at least temporarily, and as i peo mentioned, the numbers clearly show that it is more recent8รท higher than lower paid people that are bearing the burden. People are suffering all across the income spectrum. In terms of getting back, i would say that we, i would say that probably over the course of the get next month or so,theo unemployment will peak and and then asore no we return to more normalnt w levels of Economic Activity, it is a reasonable expectation that unemployment will start to decline again itle may decline sharply but it isisy lows. Likely to remain well above the levels that we saw it will tais year, and all through 2019 and 18. There were 50 years lows instany unemployment. It will take some time to get back to where we were. Cont i have every reason to think we can get back. Economy should substantially recover, but once the virus is under control. Ending with your final question, think it is a major takeaway for the way i look and the way we are looking at the economymy now at the fed to place probably less weight on realtime estimates that and the natural rate of unemployment. We see that we were able to root move down to three and a half percent and be there without really any sign of a reaction from inflation or other imbalances in the economy it is a place we can get back to, we will get back to. It will take some time. The main thing to do is get on that road to recovery and stay on it for a long period of time. I think that is what i expect will happen. I want to praise you for a long before this crisis, pragma talking about not having too much faith in the stars and be more hat pragmatic on the data. You emphasized the idea that more stimulus, not just stimulus, more support for the supply side of the economy is needed, and we will probably have to be Monetary Policy, ensure that if we cut off fiscal stimulus too small to sue, it is not just a demand issue, it is a supply issue. That said, there are concerns some people raise about the fiscal policy in the future even though fiscal hawks know they should bese a spending rigt now. Questionnev is, what does fiscal especialibility look like a year or two down the road or three, especially if we will is for still have ten or 8 unemployment, long term of unemployment . How my . Should we, since we are elected officials, what kind of principles would you want them to be thinking about in terms of the recovery of the economy . Whenwhen i was at bank of engla, i got into a public tiff with thehe the governor to lecture the parliament on fiscal responsibility. I didnt. What role does the fed have to play in the discipline of fiscal policy Going Forward . We dont play a formal role in fiscal policy. Meaning that we would not take a position, i would not take a position supporting a particular bill. I might ask questions, answer questions that i get privately from members and things, but it is not our role to supervise congress. It is the other way around. Congress is preacher of congressionalnal ac action. Ersighlike other fed shares thrh time, i have said things that fairly highlevel about imon sustainable the econ fiscal path overtime. I think it isiwick. Important ad it appropriate because it is important for the long run for the economy, which is part of forc our failure. Riatits worth remembering, congress has moved quickly with real force here. And appropriately so. This is the biggest shock our has felt in modern times. It is the the biggest fiscal response. Far larger than any other fiscal response and it came very quickly. That is a good thing. The issue is that there is a lot of uncertainty. It may take even just a few more months then we would like for the economy to recover. My colleagues and i have been speaking to a wide range of thes leaders, not for profit, full profit, businesses all across the u. S. Economy, all kinds of businesses, and what comes, i through is there is a senset thm that a growing sense i think,e. That the recovery may come more slowly than we would like, but it will come. That may mean that it is necessary for us to do more. The tradeoff is this. As i mentioned in my remarks, we know that long periods of unemployment leave a shadow thaf over the labor force and our economy and peoples lives on math. We know waves of bankruptcys can weigh on Economic Activity for years. If you think about the small and medium sized businesseslly,n that are really the heart of our economy. The heart of job creation. Those are typically, often anyway, the product ofgeneratioo generations worth of work tot beca create, if they avoided become insolvent because of economic fundamenta activity not recovering fast enough, we would lose more than justed q that business. We lose something fundamental and it wont be able to be replaced quickly. Abin terms of fiscal discipline, absolutely believe that we mustst eventually, have to return to a sustainable fiscal path. We have to get the economy going and then n the debt. It happened for a long period gradually reduced the ratio of the debt to the size economy. That is how you a do it successfully and many have done it successfully t over a period of time think like that. I do think the time to do that is during good times. When the economy is strong andos unemployment is low, that is the time to be addressing thosee concerns. I think now, when we are facing the biggest shot that the economy has had in modern times, is for me not the time to prioritize considerations like that. I do think that we can comewe back to themll fairly quickly, which is to say a few years down the road when the economy as well and truly recovered ornl at least mostly recovering. Thank you for that. Ld lturning to some operational Monetary Policy issues. All kinds of market people and reporters would love to ask you about ly a i would like before getting what im sure will be your answer on that, i would like to ask a little more deeply about the thinking behind the u. S. At n content. Qeone a way of looking at it isf course that rate cuts are essentially substitutes, so that if you can do more uv 12ra these various creditte facilitis andlitica interventions of the r others therelisted, you can always scale that up which may have negative political effects. The in flip side is that on the otheruati side there are people arguing negative rates have a particular use in terms of currency evaluation, but also as my colleagueses have argued, it might enable more oi because it gives yount more spa. How do you feel about the arguments about the four and negativeon n rates in the u. S. . H letis me start by saying that the committees view on negative rates really has not changed. This is not something that we are looking at. We chose not to implement rates during a Global Crisis and purcs global recovery. D that weve said that we intend to continue relying on those tools which are tried and they are now a part of our tool kit. In fact we resisted this andl last octobers just way back in october, revisited this question and the minutes said that all participants, that is not a sentence you get to say mone very often, all participants currently not judge that negative rates currently did not appear to be attractings military policy tools in thed. United states. I would say a couple reasons behind it. Whenforw is, we do feel that our tools work. The tools we have used, forwardt guidance and assets work. We are now doing these 13 three facilities. We think they were to. Kit that works. E a good tool b that it works. Ce i think that is where we will be using. Also the evidence on the effectiveness of negative ratess mixed. Mixed. There are research that says its beennter effective. Plenty of doubters. The issue really is the concern the interrupting intermediation process and reducing tank profitability nearby reducing the veiled availability of credit in the economy. It the is an unsettled area. I know there are fans of the policy, but for now its note co and that ithat we are considering. Iwe w think we haveil a go to ad questi tool kit and thats what were using. Delighted to hear you say that. Let me turn now to another question about your toolkit. Some of the facilities as you fe said Federal Reserve provides p people with liquidity, loans, temporary bridges. In the past financial crisis of 2008 and 2009, when issue wastho money was put out through cuts other measures, but it did not get invested in the real economy. The notion of pushing ana il expectationsitie were poor and o on. What makes you think that some of the facilities that have beenay t made available now wile taken up in a way that they and used in the real economy in a way that they werent 2008 to wi 2009. Will the stremain Street Lending work if you are running a small restaurant or nail salon. Wanta small tourist guiding business. I know you want to help thesenkl people. We would all like to help these people. But those sectors may shrink. In the real world. Why do we think theyre going to take these as i mentioned in my remarks, we can address liquidity problems and that is a problem that Many Companies find themselves facing. Companies that are really very directly affected by the coronavirus or in a specialthe place, the airlines, hotels, restaurants and things like that. Really, we will need to see the economy recover fairly quickly. At least for them to benefit from this. We are in a position where we Companies Based on their earnings from 2019 as we have said, and if they qualify we will we are willing to take that cash risk. As i mentioned in my remarks, we will be in a position tolreah help many many Many Companies. I certainly hope that is thed ud case with these facilities. We frankly have helped alreadyef through the announcement where markets were really losing or starting to function better than they were just a couple of months ago at the peak of the early part of the crisis where markets. Were not functioninge e well, so we see that in Many Companies that can finance themselves and thing. Is a good iet a may mean we actually aren. Needed. I think in main street though, companies that generally do not have Market Access and they will need these loans. We will wantntfo to provide the. Let me just say about mainion i. Street. For those who do not follow this closely, this is for companies that have fewer than, less than five billion dollars innies revenue, fewer than 15,00 employees. It is probably going to be for companies that dont have access to the Capital Markets of this in the gated market. These areverse the great, smald medium sizedg to companies. It is incredibly diverse. Very Diverse Industries andeet a companies and credit needs. We want too will address everything and possiblyexis can. Entsoperationally very complex. E prpeople have credit agreemen, existing credit, grievances, we i am h have to work through all of demand tha that. We are in the process of doing that. Mainut street will be t able too live in a few weeks. I am hopeful that we can meet the demand that is out there. We are committed to continuing ha innovate and adapt as weve shown ourselves willing to do with thesee infacilities. Y so, this is completely uniquen our history. Wet. Are learning as we go. As we go we will continue to be willing to adapt. I did make this point in my remarks we can make loans to solve pi who dont haveta access to private resources and capital. It is withus t the law requireso make along. As i mentioned, the passage of time is really all it takes toa turn itself lem. Liquidity problem insolvency problems. It will be a big help for companies for a while, but over longer nee period of time it mae that morere Fiscal Health is needed. I do not be lly prescribe how,i just say that it could be costly, but the benefits of it will also be potentially substantial. Thank you. Another thing, where you and your colleagues were the head of the curve before the you are putting new emphasis on the effective on the u. S. Economy. Not just the narrow trade rule. For the june federalist conference last year. I was wondering if you could take us through how you see what is happening in the west the rest of the world affecting the u. S. Recovery right now, and how you see the flight into the dollar which obviously was enabled by the swat lines in the fedsided . Central banks pro. How that benefits the u. S. Economy as well as the world. We are of course the Peterson Institution for economic acts, we think it matters. What matters is what you think matters. Airm fair enough. Tegrthe Global Economy and even more so the global financialat markets are tightly integratedit at this point. In time. Y ou over the years that has become more and more the case so it is very very much in our interest for the Global Economy to be strong. We need people to buy our exports and just in general, we benefit from a stronger Global Economy. In terms of the swat line, weti are the worldses reserve currency. Theyaround the world people Fund Economic activities from time to time and dollars. And by u. S. Dollar denominated credit assets for example, u. S. Mortgage loans and things like that wind up being bought bydol. Foreign banks who want to fund thosearou activities and dollar. These dollar funding markets around effec the world, they ard actuallyit t fairly important to the u. S. Sses Financial Markets d u. S. Economy. They are effectively providing credit to u. S. Households and businesses through these dollar funding markets. You are right, as the reality of theunde pandemic dawned in a couple of months ago, there was an understandably that meant short maturity, fixed income, it meant u. S. S. Credit at the short end. That left remarkable import unprecedented levels of liquidity in markets. We saw the dollar swap markets. We saw swapped faces hawidening and threatening those dollar funding markets. Also, playing a role in what was happening in u. S. Treasury market which was becoming highly liquiding more dysfunctional than we had seen it. With the swap lines do is that we provide eight dollars we swapped dollars for local Fund Currency with another centralg e bank, and that central bank faces off against its banks and provides dollar findings it had a very constructive effect on calming down those markets and reducing the safety premiums for u. S. Dollars. It has played a role inable to o supporting return to more normal conditions in global Financial Markets. More broadly, what we have been able to do is to help marketsme return f to more normalrnments o functioning which has thee time. Of buying buying time for health care professionals, governments to respondo fa at a time when the Financial Markets are working and theeholds Financial System s working. We do not have to face a dysfunctional market and the loss of Credit Availability for examples to companies andeffecta households. Those hat. Measures both the swap lines and facilities that we havend y done have really been o effective at achieving that. Thank you so much jay. To we are out of time and you t obviously haveo a lot to do. I want to express my admiration for what you and your members anddyo the whole team at the Federal Reserve are doing for issues a providing competence, calm, concern for the right issues and non partisan fact base worked as at a time where we need it. Thank you. Thank you very much adam