The Federal Reserve said Wednesday that it was committed to using its “full range of tools” to support the economy in the face of “tremendous human and economic hardship” caused by the coronavirus.
“As a society, we should do everything we can to provide relief for those who are suffering for the public good,” Fed chair Jerome Powell said in a virtual press conference after the Fed’s meeting concluded.
The Federal Reserve left its short-term interest rate target unchanged at a range of 0 to 0.25 percent and signaled that it will keep the target near zero for the foreseeable future as part of its extraordinary efforts to bolster an economy that is sinking into its worst crisis since the 1930s.
Powell added that the Fed is not authorized to extend grants and could only make loans or purchase assets, which might not be the appropriate form of aid to some individuals and businesses hard hit by the virus. Many important actions to support the economy will require legislation from Congress, Powell said.
“I would say that policies that protect workers, businesses, and households from avoidable insolvencies and keep businesses going so they able to produce goods and either hold on to their employees or quickly rehire them, those are going to be key policies,” Powell said. “They will come with a hefty price tag but we will come out of this event with a stronger economy and less long-run damage to the economy.”
The Fed said it will also continue to buy Treasury and mortgage bonds to help keep rates low and ensure that companies can continue to lend easily to each other amid a near-paralysis of the economy caused by the coronavirus. The central bank did not specify any amounts or timing for its bond purchases.
“The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time,” the central bank said in an unusually sweeping declaration at the top of its statement.
The Fed’s policy statement also said the viral outbreak and measures to contain it are “inducing sharp declines in economic activity and a surge in job losses.”
Widespread business shutdowns have caused roughly 30 million workers to lose jobs over the past month and a half. As layoffs mount, retail sales are sinking, along with manufacturing, construction, home sales, and consumer confidence.
Powell said that the “chances are” the economy would not rebound very quickly because people will be reluctant to return to their pre-pandemic activities until they are confident that the virus is fully under control.
During two emergency meetings in March, the central bank cut its benchmark rate to a range between zero and 0.25 percent. It has also announced nine new lending programs to pump cash into financial markets and provide support to large and medium-sized businesses as well as cities and states.
The Fed’s statement Wednesday came on the same day that the Commerce Department released grim news about the economy: Economic output shrank at a 4.8 percent annual rate in the first three months of the year — the worst showing since the Great Recession struck near the end of 2008.
The economic picture is expected to grow ever darker, with the economy forecast to contract at a shocking 30% to 40% annual rate in the April-June quarter. The unemployment rate could reach 20% when April’s jobs report is released next week.
–The Associated Press contributed to this report.