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The following is a rough real-time transcript from Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting Wednesday.

JEROME POWELL: Good afternoon. The pandemic continues to cause tremendous human and economic hardship here in the United States and around the world. The most important response to this public health crisis has come from our healthcare workers, and we remain grateful to them and to the many other essential workers for putting themselves at workday after day in service to others and to our country.

All of us have a role to play in our nation's response to the pandemic. At the federal reserve we remain committed to use our tools what we can and for as long as it takes to provide some relief and stability, to ebb sure the recovery will be as strong as possible, and to limit lasting damage to the economy.

In recent months economic activity picked up as the economy began to reopen. Many businesses opened their doors, factories restarted production, and more people left their homes to engage in various activities. As a result household spending looks to have recovered about half of its earlier decline. Although spending for services such as air travel and hotels has shown much less of a pickup.

The recovery in household spending also likely owes to stimulus payments and unemployment benefits which gave support to household incomes.

In contrast, indicators of business fixed investment have yet to show a recovery. Even with the improved economic news in May and June, overall activity remains well below its level before the pandemic and the contraction in real GDP in the second quarter will likely be the largest on record.

The labor market has followed a similar pattern. After presip tus drops in March and April employment rose strongly in May and June as people returned to work. As a result of the 22 million jobs that had been lost about one-third had been regained as of the June payroll report. The unemployment declined in May and June but at 11.1% remains far above before the outbreak and greater than the global crisis. In addition the downturn has not fallen equally on all Americans. Those least able to bear the burden are most affected. The rise in joblessness is more severe for lower wage workers and women and Hispanics. This reversal has upended many lives and created great uncertainty about the future.

The pandemic has also left a significant imprint on inflation. For some goods, including food, supply constraints have lead to higher prices adding to the burden for those struggling with lost income. More broadly however weaker demand in sectors such as travel and hospitality that have been most affected by the pandemic has held down consumer prices and overall inflation is running well below our 2% objective.

Along with the recent increases in economic activity have come new challenges. After declining gradually from a peak near the end of April, the number of COVID-19 cases has increased sharply in many parts of the country intestines mid June. We have entered a new phase in containing the virus which is essential to protect both our health and our economy.

As we have emphasized throughout the pandemic, the past forward for the economy is extraordinarily uncertain and will depend on our success in keeping the virus in check. Indeed we have seen some signs in recent weeks in the renewed measures to control it are starting to weigh on economic activity. For example, some measures of consumer spending based on debit and credit card use have go down since late June. A slowing in job growth especially among slower businesses.

A full recovery is unlikely until people are confident that it's safe to reengage in a broad range of activities. The path forward will also depend on policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.

The Federal Reserve's response is guided by mandate to have stable prices for people along with the ability to promote the stability of the financial system. We're committed to using our full range of tools to support the economy in this challenging time. We have held our policy rate near zero since mid March and stated we will keep it there until we're confident that the economy has wlred recent events and is able to reach maximum price stability goals. We've been purchasing sizable quantities in order to support orderly conditions in the markets which is vital to the flow of credit in the economy. To sustain smooth market functioning and foster effective transmission of monetary policy we will continue to increase our holdings of treasury and agency mortgage-backed securities at least at the current pace. These purchases are fostering more accommodating financial condition. The Federal Reserve has been taking forceful actions to enforce the flow of credit for households, businesses large and small, and for state and local governments. Without access to credit, families could be forced to cut back on necessities or lose their homes. Businesses could down size or close resulting in further job losses and income losses and worsening the downturn. Preserving the flow of credit is essential for mitigating the damage to the economy and promoting the recovery.

Many of our programs rely on emergency lending powers that require the support of the TREASURY DEPARTMENT and are available in very unusual circumstances such as those we find ourselves in today.

These programs benefit the economy by providing financing where it is not otherwise available. In addition, by serving as a backstop to key credit markets the programs have significantly increased the extension of credit from private lenders. We are deploying these lending powers to an unprecedented extent enabled in large part by financial backing and support from Congress and the treasury. We will continue to use these pours until we're confident we're solidly on the road to recovery. This week we extended these programs through the end of the year.

When the time comes, after the crisis has passed, we will put these emergency tools back in the tool box. As I have emphasized before, these are lending powers, not spending powers.

The Fed cannot grant money to particular beneficiaries. We can only create programs with broad based eligibility to solvent entities with the expectation the loans will be repaid. Many borrowers will benefit as will many others in the economy. It may be difficult to repay may not be the answer. In these cases direct fiscal support may be needed. Elected officials have the power to tax and spend and make decisions where we as a society should direct our collective resources. The fiscal policy actions taken thus far have made a difference to families, businesses and communities across the country. Even so the current downturn is the most severe in our lifetimes. It will take awhile to get back to the levels of at the beginning of the year and will take continued support from monetary and fiscal policy to achieve that.

Before taking your questions, I'll provide an update on our review of our monetary policy framework. Excuse me. As a reminder we began this public review of our monetary strategy tools and communication processes, a first for the Federal Reserve, early last year. Our purpose has to take a comprehensive look how we can best meet our maximum employment and price stability objectives in the years ahead, particularly in light of the general lower level of interest rates around the world. As is evident in our current situation, the interest rates have reduced the scope for the committee to support the economy by cutting interest rates.

Our plans to conclude this review were, so like many things, were delayed by the pandemic. At this meeting my colleagues and I resumed our discussions. Our focus was on possible enhancements to our statement on longer run goals and monetary policy strategy. This document states our goals, articulates our approach to monetary policy, and serves as the foundation for our policy actions.

While I do not have details to share today, I'm confident we will continue to make progress and will wrap up our deliberations in the near future.

We understand that the work of the Fed touches communities, families, and businesses across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.

Thank you. I will look forward to your questions.


Q: Chair Powell the Fed today decided to extend dollar liquidity swap lines with a number of banks around the world. Why was that important to the Fed, and how concerned are you about dollar shortages persisting through time from the pandemic?


A: Our dollar swap lines we introduced those at the beginning of this episode after the pandemic made itself present. And dollar funding markets were in very difficult shape at the time. And the introduction of the swap lines has really restored dollar funding markets around the world to fairly normal levels of activity. And so they kind of serve their purpose. But we extended them yesterday morning really to facilitate planning by other Central Banks and just so people will know that those facilities are still there. We want them to remain in place and be available as long as they are needed. And since the crisis and the economic fallout from the pandemic are from over, we're going to leave those in place for the time being. We'll leave them in place until we're confident that they're no longer needed. There's nothing going on in the market right now that raises any concerns. It's just we want them to be there as a backstop for markets.


Q: Mr. Chairman, you said several times now you have lending not spending powers. Given that a lot of the capacity of these programs has not been used, barely used, do you think that some of this money that has been dedicated by the treasury to the Federal Reserve should be used by Congress to direct grants to businesses that are in need right now or households now that Congress is saying that money is limited and they do not want to pass a large stimulus bill. Is this money doing the best for the nation as a backstop for Federal Reserve programs that don't seem to be being used all that much right now?


A: That's really a question for Congress. They appropriated that money. $454 billion for our facilities, and it's really a question for them. So you're right that our facilities have not -- we haven't done as much will lending as we thought. In substantial measure that's because markets started working again fairly soon after we announced the facilities in the corporate credit and the muni space and the short-term funding facilities, those that we set up. We didn't need the funding we thought we would. On the other hand, it's important that the facilities stay in place. That's why we extended them yesterday. It's important that they still stay in place until we're very confident that the turmoil from the pandemic and economic fallout are behind us. So I can't really speak to what Congress should do it. But it's important the facilities are there and are fully funded in case the need arises down the road. We don't see them now.


Q: Is there any consideration been given to asking Congress to allow the Federal Reserve to lend to companies in bankruptcy?


A: Not that I'm aware of, no.


Q: No doubt you were paying attention when two of your predecessors were up on clinically answering questions from law makers. A question had to do with the continuation of these pandemic unemployment it could be a disincentive to work. Both of them addressed that. I wondered if you would as well? As a well, what have you learned the degree to which this has lead to a widening of the wealth gap to the point that people are experiencing two different kinds of pandemics. Some are getting through with what they had saved and others are struggling to get by. I wonder what the Federal Reserve could have in bridging that yawning gap?


A: Your first question, I wouldn't want to be giving very detailed specific advice on particular programs and the level they should be at and that kind of thing.

I will say the following, this pandemic and its fallout really represents the biggest shock to the US economy in living memory. We went from the lowest levels of unemployment in 50 years to the highest we had in 90 years and we did it in the space of two months. I would say that response from the fiscal authorities was strong. It was fast. It was broad and appropriately so. I think we are seeing the results of the earlier strong fiscal actions. When you see the spending that's happening, when you see small businesses staying in business even though the economy hasn't fully successfully sustainably reopened yet in many places, you are seeing what happens with that money. So in a broad sense it's been well spent. It's kept people in their homes. It's kept businesses in business. That's all a good thing.

I think in the broad scheme of things that there will be a need, both from more support from us and more fiscal policy. Fiscal policy is up to Congress. You see the ongoing discussions that they're having. It suggests to me that there's -- both sides, they're wrangling over various provisions, but nonetheless believe there is a need for some additional fiscal support. The last thing I'll say is that if the expansion -- sorry. Even if the reopening goes well and many, many people go back to work, it's still going to take a fairly long time for the parts of the economy that involve lots of people getting together in close proximity. That means many of the people that were laid off from those industries and that's restaurants, bars, hotels, public entertainment, all those places, travel, and accommodation, many of those people are going -- they can't go back to their old job. There won't be enough jobs for them. Those people are going to need support. I can't say what the exact level should be. It's not our role. But they're going to need to support if they're going to be able to pay their bills to continue spending money to remain in their current rental house or apartment or house if they own it.

So I think there will be a need.

In terms of inequality really, I think it's fair to say that the burdens of the pandemic have fallen heavily -- they've fallen on everyone, but have fallen heavily on those that work in the service industries in relatively low paying jobs. There was a figure that came out of some of our research that was that if you make $40,000 a year or less than -- you have a 40% chance of losing your job in April or May. It's falling very heavily on those that have the least financial wherewithal to bear that. That happens to be heavily skewed to minorities and to women. That's just what the pandemic is doing.

From terms of what we're doing, what we're trying to do is create an environment in the financial markets and the economy where those people have the best chance they can have to go back to work to their old job or to a new job. That's really what we're doing. Everything we do is directed at that. I would say one last thing on inequality and that is it is an issue, a growing issue in our country and in our economy for four decades. And you see it has many faces. You see it in the relative flattening out of incomes for people in lower and middle incomes as compared to those at the top. You see it in low mobility where people that have chances to move from the bottom to the middle or top have declined than they are in other comparable countries. It's a serious economic problem for the United States. It has underlying causes to four decades of evidences it's about globalization and the flattening out of educational attainment in the United States compared to our competitor countries. It's about technology advancing too. If you're on the wrong side of those forces, it's been -- your income has stagnated. It's a critical problem for our society, but one that mainly follows to fiscal policy and other policies. Our part of it is to push as hard as we can on our employment mandate while keeping price stability. We saw what happened to people at the lower end of the income spectrum in the last expansion. It was the best labor market in 50 years they told us. We saw the biggest wage increases were going to people on the bottom of the wage spectrum for the last two years of that ten year expansion. A tight labor market is probably the best thing the Fed can foster to go after that problem, which is a serious one


Q: Chair Powell you described our asset purchase objective as stabilizing markets. With markets having stabilized aren't the asset purchases now doing more for addressing market function by supporting your macroeconomic objectives? The other question is, what is your strategy going to be with respect to asset purchases to support your macroeconomic objectives going forward?


A: You're right. The asset purchases in their current size really sprang from severe dysfunction in the treasury and MBS markets in reaction to the market in the pandemic. Thanks to those purchases, we have substantially restored, not fully, this is absolutely critical. That market is part of the absolute bed rock of the global financial markets. It's essential that it work well and it is doing so now. We've always said, though, that we understand, accept, and are fine with the fact that those purchases are also fostering a more accommodative monetary policy that would tend to support macroeconomic outcomes. It's doing both. We've understood that for some time. The programs are not structured exactly like the QE programs were in the last financial -- in the aftermath of the last financial crisis. Those were longer run securities. The purchases are across the maturity spectrum. They're accommodating financial conditions. It's clear that's the case. In terms of our strategy, that remains to be seen. As you know we spent a lot of time in meetings this year looking at the tools that we have to adjust our current stance of policy. We do feel that our current monetary policy stands as the appropriate one. We cut rates close to zero right at the beginning. We ramped up asset purchases. Those have really helped. We gave forward guidance on both of those things, which the markets appear to understand and market pricing is consistent with those. So we think that our policy stance is a good one. We're, of course, prepared to adjust that stance as appropriate, what we deem as appropriate, to better foster achievement of our goals, of course.


Q: You talked to Larry Fink at black rock in March, April, and May according to your public calendar. I was wondering if you could tell us what you talked about and if the topic of those conversation with corporate credit facilities, how do you handle conflict of interest in those conversations.


A: Black rock is our agent. We make the policy decisions in conjunction with our colleagues and they execute our plans. I actually don't remember what I would have been talking with him about. He's the head of a major service provider. He generally checks in to find out if we're okay with the quality of the service that Black Rock is providing. I don't have the daily face-to-face interaction with anybody else at Black Rock or as you can see three phone calls in the course of a few months. There wasn't very many. I think their conflicts are managed extremely carefully in the contractual arrangements we have with them. Again, I would -- I can't recall exactly what those conversations were. They would have been about, what are you seeing in the markets and things like that too. Generally exchanging information and -- he's typically trying to make sure that we are getting good service from the company that he founded and leads. I'd say that's his main objective when we talk.


Q: I wonder if you could give us an update on the coin shortage that you talked to law makers about last month. What if anything does that tell us about this sort of economic circulatory system?


A: Yes. The situation with coins is that -- the quantity of coins is going up. Was adequate before the pandemic. The problem is that circulation kind of stopped because stores were closed, banks were closed. Customers weren't spending. So the coin stopped moving in the system. So we've been working ever since that began to happen. We saw it happening right away. We've been working to try to reverse that disruption of the supply chain and restore normal circulation for our coins. We're working with the US Mint to address the issue. Just last week the Mint issued a statement asking for the public health and various people put their coins back in circulation. We created a coin task force with all of the stakeholders, you know, banks and the armored carrier, the banking community, credit unions, everybody in the coin supply chain. We're in frequent communication with the banks and with the armored carriers. We're trying to get back to where we need to be. So we do think the inventories are building up. The Mint is making coins as fast as it can, but things happen in the factory environment. Someone will come to work with COVID. I think this has happened in almost every factory environment in the country and they'll shut down for a day and come back and that kind of thing. We're closely monitoring it. It's a significant issue. We've got a lot of resources on it. And we do feel like we're making progress.


Q: I'm wondering if you can be a bit more specific about any rinks that you see related to a double dip recession or signs that the recovery was stalling or may begin to be stalling compared to the signs we were seeing earlier in the summer?


A: Yeah. Maybe I'll talk more broadly about the outlook and include your question in it. So as I mentioned, economic activity in employment picked up beginning in May and right through June and remained well below their levels because, I'd say, job gains have reversed about a third of the job losses from March and April, and consumer spending has reversed about half of that drop. Nonetheless those were sooner and stronger than we expected. What happened then was, along with that positive data, we got the virus increases, starting in the middle of June in lots and lots of states around the country. That brings us to a new point here which is we need to in addition to dealing with the health crisis, we have to remember this is really a health crisis, and these are people who are having the coronavirus. And it's taking a terrible toll. So we've got to deal with economic ramifications of that. So what we're seeing is that we monitor quite a lot of what we think of as sort of nonstandard high frequency data. That's become a very important thing, even more important than usual in the work we do. What that data shows is that the pace of the recovery looks like it has slowed since the cases began that spike in June. Some measures of consumer spending based on debit and credit card data have gone down. Recent indicators show slowing in job growth particularly in smaller businesses. Hotel occupancy rates have flat ntd out. People aren't going to restaurants, pharmacies and beauty salons as much. Consumer surveys that dropped when the pandemic arrived and moved back up sharply. They look like they're softening again. There are areas of strength, housing and motor vehicle sales are strong. On balance it looks like the data are pointing to the slowing in pace in the recovery. I want to stress it's too early to say both how large that is and how sustained it will be. We just don't know yet because we have to wait to see the actual data on spending and employment come in. But this is what we're seeing. Of course, we're monitoring it very carefully. I would be remiss in not stressing this enough. The path of the economy is going to depend to a very high extent on the course of the virus, on the measures that we take to keep it in check. That is just a very fundamental fact about our economy right now. The two things that are not in conflict, social distancing measures and fast reopening of the economy actually go together. They're not in competition with each other.


Q: you added the sentence into the statement about the course of the economy depends on the path of the virus. Is this -- do you feel this idea or this view is not widely enough understood? Do you feel -- you had warned back in May too early reopening or incautious reopening would harm the economy? Do you feel that message was not heard and some of these reopenings took place sooner than they should have.


A: You know I think we feel it might be the most central fact or the most central driver of the path of the economy right now is the virus. And you're seeing that again. You saw that during the lockdown. When we got cases way down, you saw the economy reopening and you saw spending go up and hiring go up. Now that the cases have spiked again, again, the early data, the high frequency data suggests that there's a slower pace of growth at least for now. We don't know how deep or how long that will be. So it's such an important sentence, we just decided that it needed to be in our postmeeting statement. It's so fundamental.

I think we can't say it enough. It's really important. We're -- you can think of it as three stages. There's the lockdown, and we know what that looks like. We'll get the data later this week on GDP being down very you historically large amounts. Then there was the reopening. We would expect that many, many people would go back to work, those whose jobs could be done without exposure to lots of people in tight groups, they should be able to go back to work during that phase fairly quickly, but that would depend on being able to keep the virus under control which will depend on wearing masks and other social distancing measures. So that's where we are.

It's such an important factor. It's in -- we're all talking about it, so we thought it had to be in the statement.


Q: I'm wondering, what it is, you've talked a lot about using all of your tools and Governor brainered talked about moving from support to accommodation what you can do? You've lowered rates to zero and set up the lending programs. The tools you talked about are in generally service in keeping the interest rates low where they're already. Unless you were to go to negative interest rates, what additional accommodation the Fed can bring or is it really up to the fiscal authorities to this point to rescue the economy, to add additional help for it?


A: Right. You're right. We are committed to using our full range of tools to support the US economy at this difficult time. We will always remain committed in that sense. We feel like we have ways to further support the economy, certainly through our credit and liquidity facilities which are effectively unlimited. We can adjust those programs. We also can adjust our forward guidance. We can adjust our asset purchases. There are things we can do.

We feel like we have the ability to do more. But I would not disagree with the importance of fiscal policy with your statement about the importance of fiscal policy. Fiscal policy can do -- can address things that we can't address. If there are particular groups that need help, that need direct monetary help, not a loan, but an actual grant as the PPP program showed, you can save a lot of businesses and a lot of jobs with those in a case where lending a company money might not be the right answer. The company might not want to take a loan out in order to pay workers who can't work because there's no business. Lending is a particular tool. And we're using it very aggressively. But fiscal policy is essential here. Congress's action early in the pandemic historically large by any standard around the world and certainly by US standards. It's really helping now. It's really helping. It's going to stand up very well to scrutiny down the years. Congress is very fast and very open handed response I think has really helped. And I think -- I know -- as I said very likely there will be more needed from all of us. I see Congress negotiating now over a new package. I think that's a good thing.


Q: So you talk about it several times. The FOMC statement says the path of the economy is linked to the path of the virus. It looks like a vaccine might come this year, either in October or towards the end of the year. Has the committee talked about how that might change said policies. Do you see vaccine helping inflation get back to where you want it to be?


A: Of course the concept of vaccines comes up in our discussions, of course it does. I have to say our job is not to plan for the upside case. The upside case, we've got that covered. Our job is to plan for the full range of things that could happen. So we're assuming we're going to continue to assume that our facilities are needed, that hour policies are needed, and that the public needs the support that we're giving the public until shown otherwise. There's great uncertainty around the development of therapeutics and vaccines. All of us want them to happen as soon as possible. But we can't plan on that. We've got to hope for the worst -- hope for the best and plan for the worst I guess it goes. In terms of inflation, I don't know. I think fundamentally this is a disinflationry shock. I know there's a lot of discussion about how this might lead to inflation over time, but we're seeing disinflationry pressures around the world going into this. Now we see a big shock to demand. We see core inflation dropping to 1%. I do think for quite some time we're going to be struggling against disinflationry pressures.


Q: As you monitor the rising infections and the recovery, could you speak to what would the trigger be for doing further easing and on the flip side of that, when would it be reasonable to consider the Fed raising rates again?


A: As we've said we are carefully monitoring the situation. We moved very quickly and aggressively early. And we've been monitoring the situation. I think the markets and the -- I think our policy is in a good place. But we've looked at ways of adapting our policy as time goes by, and we're ready to do that when we think it's appropriate. I can't give you a specific trigger. It really just is when we think it would help. Would it help more than what we're doing now to foster maximum employment and stable prices.

As I said earlier or awhile back, we're not even thinking about raising rates. We're totally focused on providing the economy the support that it will need. We think that the company will need highly accommodative monetary policy and the use of our tools for an extended period. We're absolutely committed to staying in this until we're very confident that that is no longer needed. So I wouldn't look for us to be sending signals about cutting back on facilities or anything like that for a very long time. We're in this until we're well through it. And I think this -- I think the picture is you have the lockdown and then you have the reopening, but there's probably going to be a long tail where a large number of people are struggling to get back to work because those heavily affected areas of the economy are going to be challenged really to employ the millions of people who are now out of work, I think 14 million people are now out of work who were working in February, something like that.

So that's going to take awhile I think in everyone's reckoning. Everyone should know that we're going to be there for all of that.


Q: You mentioned earlier that the labor market we had was the best we had in 50 years yet at that point the black unemployment rate was still double that of whites. So I wanted to ask you, you know, we've seen some economists and even (Audio breaking up) more specifically target the gap between minority and white unemployment rates. Even if you don't get a mandate from Congress, is it something you would consider going forward and how would you do that? And then I also wanted to ask you about former economist Claudia sum's writing from last night. She gave a hair rowing account of her time at Fed, harassment and professional gas lighting that others have also spoken to. Is this your Federal Reserve?


A: So first on the unemployment. You're right. We always point this out in our remarks. While the aggregate unemployment rate was 3.5%, every economy, every market in every economy has longer run issues. One of ours is the disparate level of unemployment between blacks and whites. It's generally sort of twice as much -- twice as high for blacks. So even -- but this was the lowest black unemployment rate in 50 years -- since we started keeping records which was less than 50 years ago. So that's just a fact. It's not a good fact.

We have started, though, in recent years to focus considerable time and attention on disparate levels of unemployment, for example, among different racial groups and demographic groups. We regularly discuss those differences in our FOMC discussions. We call them out in testimony and in speeches and in our monetary policy report to Congress. You'll see it everywhere in all the things that we do.

So what does that mean? I think what we learned is that a tight labor market really does a lot of good things for minorities and people in the lower income spectrum generally. Tight labor markets, it took eight years, the eighth, ninth, and ten years of that expansion to get to those benefits. . So we need more than that. Waiting 8, 9, 10 years to get there. We're going to get back there as fast as we can. Society more broadly can affect these things. We don't really have tools that can address distributionle disparate outcomes as well as fiscal policy, policy generally, education, healthcare, all those things are much better at doing that.

In terms of -- so we do -- you will see that discuss the black unemployment rate discussed all the time in what we do. I think we clearly understand now that it's something to weigh when you get a tight labor market, it's something you want to focus on and weigh. It's very much in our thinking, again in a world where we don't have the best tools to address that. It's something we're doing.

So I have not seen that -- I did not see that blog post yet although someone did mention it to me. We, of course, have been in meetings until just before this. And I will take a look at it. I will do that. Without having had a chance to think about it, read it, understand it, I'll just say a couple things. First, I think it's fair to acknowledge that there's been a lot of pain and injustice and unfair treatment that women have experienced in the workplace, not just among economists and at the Fed that's been going on for far too long. Like every other organization, the Fed could have done more and should have done more. I would say, though, that we have made it a very high priority to have as diverse and inclusive an organization as we can.

I think we've made a lot of progress on that. I think we're in a place where it's free to speak, views are welcome, people can disagree but must do so respectively. I think a lot of organizations are coming around to understanding the importance of that. My experience has been from my career in business too is that organizations -- the really successful organizations in our society get this. They do. They get it if you want to attract the best people, you're going to attract the best people by having a diverse and inclusive workforce and workplace.

So we've made diversity a priority. We actually -- this has been a big issue for the economics profession. We had the two heads of the AEA task force which happen to be Ben ber knacky and Janet yellen. I cohosted an event with them last year or year before that had 500 people or something like that listening about these issues. So we're doing a lot. I'm sure we can do more. We're doing a lot to foster a respectful climate, particularly for women, but for all people. So it's a very high priority for us as an organization. I will look into that when this is over.


Q: on the labor market jobless claims rose again recently, and new hiring activity has weakened. How big are the risks of the unemployment rate rising and job growth turning negative this summer?


A: As I mentioned earlier, we're watching this high frequency data. Of course, the official labor market reports come out once a month. No one has had a very good record lately of predicting what they're going to say, May and June stronger than anybody expected, particularly in May. I would say some humility is appropriate here in terms of saying we understand exactly where this is going. All we can say today there's evidence in high frequency data, the surveys, and your tracking, you get pictures of spending. You get pictures of people's movements. It looks like we're seeing a slowdown in the rate of growth. And that might be short lived. It might not be. It seems to be related to -- the timing seems to be related to the spike in cases that began in the middle of June.

Now, I really don't want to get ahead of where the data are on this. So we're just going to have to see. The data over the next couple months will answer that question. Recent experience suggests we need to wait and see. In any case, there's clearly a risk we're going to see a slowdown in the rate of growth, in economic activity, and in hiring. It might still be at a robust level. Honestly we will not know until we start to see more data come in.


Q: I want to ask about the 13 facilities. You've used your emergency authority to buy assets that you can't directly buy like corporate bonds, ETFs. I was wondering what is the scope of your authority under 13 (3) what type of assets could you buy? Could you buy equity through a SPV for example.


A: We haven't looked at that. We haven't done any work or any intention in buying equities. We're bound by the provisions of 13 (3) which requires that we make programs or facilities of broad applicability, meaning it can't just be focused on one entity. It has to be a broad group of entities. There's a lot in 13 (3) about the solvency of the borrowers. It was amended after the financial crisis and it was written in a way that was meant to make it challenging to bail out large financial institutions. There was a lot in there to make sure that they were going to be solvent and things like that. We have to meet those requirements. We haven't looked and tried to say, what can we buy? Let's make a complete list. We felt that using these facilities that we could buy corporate bonds and municipal bonds too.


Q: just to follow-up really quickly, so is it generally supposed to be primarily directed at debt instruments since you talked about borrowers.


A: The statute doesn't say that. You could read the statute that way if you want. Honestly we haven't tried to push it to what's the theoretical limit of it. I think clearly it's supposed to replace lending. That's really what you're doing. You're stepping in to provide credit at times when the market stopped functions. That's fundamentally what you're doing with 13 (3). So I think you've got to sort of work within that framework.


Q: One of the things in this crisis that's unusual is that companies are cutting wages and salaries. That's something we haven't seen much. I was wondering what the Fed is thinking about this? It seems to indicate that inflation could be more volatile in the coming months and coming years.


A: I think that the main thing that tells you is that the labor market has a long way to go to recover. We had a good labor market. It wasn't perfect. There were always issues. There are always going to be issues within an economy. But the labor market really has a long way to go now even with two very strong months of job creation. We still have 14 million people unemployed. It's a long way to go. That leads to a situation where there are so many people looking for jobs and we have the economy only partially reopened. So there aren't -- until the economy or as the economy fully reopens people can go back to work. So it's a tough situation. I've read reports of that. Of course the reported wages went up because of the composition effect. Low paid workers didn't go back to work. They were the ones that deposit laid off so average hourly earnings went up. But clearly the pressure, there will not be much upward pressure on wages and compensation in the aggregate level in a world where there's an awful lot of people looking for work. So it just underscores again the urgency of doing everything we can to restore the labor force and support those who want to be in the labor force but whose jobs have gone away for some period of time as they find other work due to this natural disaster.


Q: I wanted to ask about guidance. Do you see merits to tying your asset purchases to economic outcomes? And would you consider both inflation and labor market conditions as part of those outcomes? Specifically for the labor market, what conditions would you want to see before you think about pulling back stimulus?


A: That's a great discussion. We've talked about that at past meetings and I imagine in future meetings. We haven't made decisions on that. You have a couple ways to go. You can tie them to dates. You can say we for a specific period of time we will keep rates at X level or we will keep them there until you achieve a certain macroeconomic goal. And it either be inflation or it can be an employment goal, as you pointed out. I think there's attraction in all of those, depending on the situation. I think for obvious reasons, you can imagine situations where you would really want to be targeting macroeconomic outcomes. It's also the case that sometimes date-based guidance works too. I think it really is very fact specific. It's not something -- we haven't made any decisions on that, so I wouldn't be standing here telling you we're going to go this way or that way should the time come for us to change our forward guidance.


Q: I wanted to ask on the stimulus bill that senate Republicans are considering they're weighing when to (Audio breaking up) to ease the tier one leverage issue for banks. Are you concerned that it will not meet the stress test that showed under the most severe scenarios for economic recovery that several banks (Audio breaking up) approach the regulatory minimum capital requirements.


A: I think what the stress test showed is that under the regular weighed stress test banks passed. In the middle of the stress test came the pandemic. We quickly dropped in three other scenarios which were, you know, really bad scenarios. Many of the banks passed but some didn't. That was done very quickly. So we pivoted and we used the provision that says we can -- say, there's been a material change and we're going to ask them to resubmit their capital plans. We also stopped buybacks, share buybacks and limited dividends. We're working through all the details of how all that will work. I think we're going to send out the stress scenarios on September 30th. So I would say that's -- that process is working that way. But you're making a connection to the Collins amendment fix. What's going on there is that, like many other supervisors and regulators around the world, what we found is -- we have found, our banks are strong. They're strongly capitalized with lots of liquidity. They've really been a source of strength in this crisis so far. They've written off bad loans and things like that. They're still well capitalized and strong. They will be a source of strength in this situation. So but what we did earlier was -- what happens is that banks run up against their leverage ratio, which is a non-risk sensitive measure just in the amount of assets on the balance sheet. If people put cash into deposit at the banks and they reach a limit of how much they can grow or made loans, companies drew down loans and deposited into cash. We gave some leverage ratio relief earlier by temporarily. It's temporary relief by eliminating temporarily treasuries from the calculation of the leverage ratio.

This is another additional thing to do. If Congress chooses to do this, we would want it to be explicitly temporary. This will not be a permanent change in capital standards. We haven't decided to do it, but it would give us the ability to allow banks to grow their balance sheets to serve their customers better. I have to tell you, if you look around the world, many, many bank regulators have given leverage ratio relief, Swiss national bank, the bank of Japan, the European Commission, the bank of Canada did, we did. It's not -- what it's doing is it's allowing them to grow their balance sheet to serve their customers. That's what it's doing. I would want it to be explicitly temporary if we do do it.


Q: I wanted to ask how the framework review is working in tandem in your explicit afford guidance. Is the idea that you would announce the findings of the Fed review before committing to some explicit afford guidance or curve control policy?


A: So, I do think that completion of the review would -- first of all, it's something, it was a very high priority. We're really looking forward to completing it probably at the June meeting, but it might have been the meeting before that, we were right on track. Then we got distracted. We weren't expecting the pandemic, nobody was. The pandemic came in. I think it's important to go back and finish that. I think that will inform everything we do going forward. I would also tell you, though, that to a very large extent the changes we'll make to the statement of longer run goals and monetary policy strategy are really codifying the way we're already acting with our policies to a large extent we're already doing the things that are in there. This is just a way of acknowledging that and putting them in the document. I can't tell you what the exact timing of that will be. But I do think that's a sensible way to think about it.

MNI Washington Bureau | +1 202-371-2121 | brooke.migdon@marketnews.com
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MNI Washington Bureau | +1 202-371-2121 | brooke.migdon@marketnews.com
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