This post was originally published on this site
The Federal Reserve’s trillions of dollars in asset purchases since the coronavirus pandemic struck the U.S. economy have helped a broad set of Americans beyond financial market participants, San Francisco Fed President Mary Daly said Monday.
“I feel we’ve taken appropriate actions thus far, this has eased pressures in financial markets,” Daly said during a conference call with reporters after a speech to the National Press Club.
“Importantly, and this often gets lost, our actions that ease financial markets spill into better rates for borrowers,” including businesses and households, she said.
“This relief we have given is widespread and broadly supports the economy, not narrowly supports the economy,”’ Daly added.
Since the beginning of March, the Fed’s balance sheet has expanded by just over $3 trillion, with the bulk of it from central bank purchases of Treasurys and agency mortgage-backed securities. These purchases have helped hedge funds and other firms from tail risks, which refers to an event that statistically has a low probability of occurring but is still possible.
Some analysts have also argued the Fed’s purchases are leading to financial excesses and a stock market bubble. The poster child for this argument is the plan by Hertz Global Holdings Inc. HTZ, -33.21%, the car-rental company, to sell stock even though it has filed for bankruptcy protection.
Read:Bankrupt Hertz files to sell shares that could be ‘worthless’
Roberto Perli, a former Fed staffer and now analyst at Cornerstone Macro, said the Fed had no alternative but to act to support financial markets.
“What is the alternative? Do nothing to support markets in face of largest shock seen since the Great Depression?” he asked.
In her prepared remarks, Daly said the Fed would keep its easy monetary-policy stance until “the economy has largely recovered what’s been lost due to the virus.”
She said that Congress should be prepared to spend more money to help the economy recover, but added she wasn’t sure yet if any emergency funding was needed.
After opening sharply lower, U.S. equity benchmarks finished in positive territory, with the Dow Jones Industrial Average DJIA, +0.61% ending higher on Monday after an opening decline of nearly 3%.
