Kashkari Says Fed Can Do More; Flags Corporate, Muni Debt
Kashkari Says Fed Can Do More; Flags Corporate, Muni Debt
(Bloomberg) -- The Federal Reserve can and probably will do more to support financial markets and the economy after rolling out a string of aggressive interventions over the past week, Minneapolis Fed President Neel Kashkari said.
“Some people have suggested that we should be providing more support directly to the corporate bond market -- and I’m sympathetic with those views -- and also the municipal market, making sure that states and cities are able to access the capital markets as well,” Kashkari said in an interview on CBS’s “60 Minutes,” recorded Thursday and aired Sunday evening.
“There is a range of things the Federal Reserve could do,” Kashkari, the former Treasury official who oversaw the bank bailouts in 2008, said. “We’re far from out of ammunition.”
Financial markets have come under severe stress in recent weeks amid investor panic over the coronavirus outbreak and its impact on the U.S. economy.
Fed officials intervened on March 15 by slashing short-term interest rates to essentially zero and restarting bond-buying programs to pump hundreds of billions of dollars of cash into the banking system.
Over the past week, they’ve also redeployed a number of crisis-era emergency lending facilities in a bid to keep credit flowing throughout the economy.
The moves haven’t been enough to assuage investors, who continued to sell Sunday evening when stock futures markets reopened. Congressional leaders haven’t yet come to an agreement on emergency economic relief over the weekend as government-mandated lockdowns spread across the country, shuttering businesses and idling millions of workers.
Kashkari said the key lessons from the 2008 experience were that policy makers “should all be erring on the side of overreacting to try to avoid the worst economic outcomes,” which means going big with the relief package and not worrying about how targeted the measures are.
“My advice to Congress, as they’re designing their programs to help workers and to help small businesses: err on being generous,” he said.
Earlier Sunday, speaking in a Bloomberg News interview, St. Louis Fed President James Bullard warned that unemployment could soar to a record-high 30% in the second quarter -- and the economy could shrink by 50% -- if lawmakers don’t formulate an adequate response to the crisis.
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