Fed's Williams: Economy Has Likely Seen 'Low Point' in Continuing Crisis -- Update
By Michael S. Derby
Federal Reserve Bank of New York leader John Williams said
Tuesday the economy may have already seen the worst of the impact
of the coronavirus pandemic, even as significant uncertainty
"Encouraging" data that has arrived as some states begin to
reopen "indicate that we've likely seen the low point of the
downturn and that the overall economy has begun to recover," Mr.
Williams said in remarks before a video meeting held by the
Institute of International Finance.
But even as the data moves in a positive direction, "the
economic outlook remains highly uncertain and it's going to take
considerable time to restore the economy to its full potential,"
Mr. Williams said. But he added, "I do believe we can get back to a
very strong economy."
The central banker, who also serves as vice chairman of the
rate-setting Federal Open Market Committee, said the Fed is
"committed to using our full range of tools to support the economy
and bring about a full and robust recovery."
Mr. Williams said the choices the Fed will make will be
determined by how the economy performs, and he offered no specifics
about what sort of actions were on the table. But he pushed back at
the notion the Fed might push its now near-zero interest-rate
target into negative territory, saying guidance about the future
direction of rates and asset buying offer more stimulative
Mr. Williams also reiterated that the Fed hasn't made any
decisions about what's called yield-curve control. That strategy
entails the Fed saying bond yields aren't allowed to exceed certain
levels and taking action to achieve that goal.
Mr. Williams spoke just ahead of testimony before Congress by
Fed Chairman Jerome Powell. In his testimony, Mr. Powell is set to
tell legislators "the path forward for the economy is
extraordinarily uncertain and will depend in large part on our
success in containing the virus. A full recovery is unlikely until
people are confident that it is safe to re-engage in a broad range
Mr. Williams echoed that and affirmed that while the central
bank and the broader government have taken aggressive action to
help buoy the economy and financial markets, what happens in the
months and years ahead will be driven by the health-care response
to coronavirus-driven illness.
Some Fed officials have offered cautious comments about some
areas opening up too soon, as multiple states are already suffering
a surge in illness again. Some are already halting or reversing
plans to get their local economies back up to speed.
"We are seeing some indications of a slowing in the pace of
recovery in states that are currently experiencing large-scale
outbreaks," Mr. Williams said. "This is a valuable reminder that
the economy's fate is inextricably linked to the path of the
virus," he said, adding "a strong economic recovery depends on
effective and sustained containment of COVID-19," in reference to
the illness caused by the coronavirus.
In his remarks, Mr. Williams said the modest usage so far of the
Fed's emergency lending facilities is in fact a good thing. While
the existence of these facilities help market participants know
there's support in case the markets get in trouble, Mr. Williams
said the Fed never intended to displace private credit markets. He
added he was heartened by the fact that companies and local
governments are able to get their borrowing needs met by the
Write to Michael S. Derby at email@example.com
(END) Dow Jones Newswires
June 30, 2020 12:45 ET (16:45 GMT)
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