Virtual Hearing - Monetary Policy and the State of the Economy (EventID=111208)

Video Description

Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/HouseFinancialCmte Follow us on Twitter: https://twitter.com/FSCDems __________________________________ On Wednesday, February 24, 2021, from 10:00 a.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Monetary Policy and the State of the Economy." __________________________________ Witnesses for this one-panel hearing will be: • The Honorable Jerome H. Powell, Chairman, Board of Governors of the Federal Reserve System Purpose and Background The Federal Reserve Act directs the Chairman of the Board of Governors (Board) of the Federal Reserve System (Federal Reserve or Fed) to testify before the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs twice a year on how the Board handles monetary policy and its observations on economic developments. Each appearance requires the Board to supply the Committees with a written report known as the Monetary Policy Report. The Federal Reserve consists of a 7-member Board of Governors, as well as 12 Reserve Banks located in various regions around the country. The Fed’s functions include conducting monetary policy, promoting financial stability, supervising and regulating certain financial institutions, and fostering payments and settlements.3 The Board has seven Governors, including a Chair, a Vice Chair, and a Vice Chair for Supervision. The President nominates the Chair, Vice Chairs, and Governors, who are confirmed by the Senate. Governors serve 14-year terms, while the Chair and Vice Chairs serve four-year terms, and must be designated for their roles separately from their appointment as Governors. Chair Powell is serving a term as Chair that began in February 2018 and will expire in February 2022. Following the Senate’s confirmation of Christopher Waller as Governor in December 2020, there is currently one vacancy remaining on the Board. Generally, the Board makes policy that the Reserve Banks implement and execute. However, monetary policy decisions are made by the Federal Open Market Committee (FOMC), which is comprised of the Board, the president of the Federal Reserve Bank of New York, and an annual rotation of four of the remaining Reserve Bank presidents. For more background on the Federal Reserve System’s structure and its conduct of monetary policy, see the Financial Services Committee memo prepared for the “Monetary Policy and the State of the Economy” hearing from February 2020. The Fed’s response to the COVID-19 pandemic In February 2020, the severity of the COVID-19 outbreak began to disrupt supply chains for many U.S. businesses and caused financial market turmoil, prompting the FOMC to make an emergency announcement on March 3, 2020 that it would reduce the federal funds rate by fifty basis points. After the World Health Organization declared a global pandemic on March 11, 2020, it became clear that the pandemic would cause a drain on consumer demand and have significant economic ramifications. The FOMC announced on March 15, 2020 that it would cut the overnight interest rate 1 percent, to a range between 0 and 0.25 percent (also called the “zero lower bound”). At the same time, the FOMC announced that it would make large scale asset purchases (LSAPs) of $500 billion in Treasury securities and of at least $200 billion in agency mortgage-backed securities issued by Fannie Mae, Freddie Mac, and Ginnie Mae over the next few months. In the months since, the FOMC has continued making LSAPs, which are often referred to as “quantitative easing.” On March 17, 2020, the Fed began utilizing its Section 13(3) lending powers to set up a wide range of facilities aimed at addressing severe liquidity constraints in financial markets, and on March 23, the Fed established the Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility (SMCCF). Through Title IV of the CARES Act, $454 billion was appropriated to the Treasury to support the establishment of additional emergency lending facilities at the Federal Reserve, and the Fed was directed to establish facilities to support small businesses (which became the Main Street Lending Program, or MSLP), as well as state, local, and territorial governments (which became the Municipal Liquidity Facility, or MLF). Throughout the COVID-19 crisis, Chair Powell has stressed that economic recovery depends on the path of the virus, as well as significant fiscal support from Congress. During his post-FOMC press conference on January 27, 2021, Powell cited stimulus payments and expanded unemployment benefits as two factors that contributed to economic recovery since last spring, but cautioned that economic activity slowed after the course... Hearing page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=407168