Financial stability vulnerabilities overall are moderate and the financial system itself has remained resilient in the face of the financial impact of the coronavirus crisis, the chair of the Federal Reserve said Wednesday.
In remarks following a regulator meeting of the interest-rate setting committee of the Federal Reserve, Chair Jerome H. (“Jay”) Powell indicated the financial system fared better than initially forecast when the coronavirus crisis arose last spring. He asserted that the Fed did its job to keep the financial system stable.
“Our overall goal is to ensure tha the financial system itself is resilient to shocks of all kinds,” Powell said in a press conference. “And that includes not just the banks but money market funds and all different kinds of non-bank financial structures as well.”
In other comments, Powell said banks are not experiencing the kind of loan defaults that were expected at the beginning of the pandemic. Nevertheless, he said that “we’re going to be careful” about banks’ second-quarter dividend payments. He said the agency is monitoring what actions to take about the payments as well as share repurchases “on an ongoing basis” and will make a decision based on bank activity – and the success in vaccinations, which he said was key to reviving the economy – in coming weeks. (Powell also said, in response to a question, that he has received a vaccination for COVID – but only the first dose, not the second.)
He also said:
- The Fed isn’t much concerned about high inflation due to stimulus legislation adopted by Congress. “I’m much more worried about falling short of a complete recovery and losing peoples’ careers and lives that they’ve built,” he said, “and the damage that will do not just to their lives but to the U.S. economy.”
- The country will emerge from the pandemic with a different economy – but he indicated there are some reasons to be concerned. “Clearly, we’re learning that things can be done from remote locations,” he says. “We’re learning that technology can replace people, even more than we thought.” However, he noted that for many people, it’s not possible to work from remote locations, indicating that lower-income, lower-educated people cannot necessarily work remotely. “That’s very much something that skews to higher income, higher educated people,” he said.