CARES Act Testimony preview

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Is there any room for optimism?

By: Ahura Chalki

FED chair, Jerome Powell, and Treasury Secretary Steven Mnuchin will testify today in Capitol Hill for CARES Act. His remarks have been published on the Fed website on Monday and here I am going to point out some of his main words and see what we have to expect from this. Here is the highlight of most important points which we need to know:

– “Indicators of spending and production plummeted in April, and the decline in the real gross domestic product, or GDP, in the second quarter is likely to be the largest on record.”

-“While recent economic data offer some positive signs, we are keeping in mind that more than 20 million Americans have lost their jobs.”

– “Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain.”

– ” We will increase our holdings of Treasury securities and agency MBS over the coming months at least at the current pace.”

 

The rest of the testimony is the report of what FED has done in past months to support the economy and their commitment to do whatever it takes to provide stability

Before hearing the question and answers, reading just the testimony says to us that comparing his words of past weeks, it sounds a bit more optimist, however, by pointing that more than 20 million American are jobless now and frustrating GDP in second quarter, emphasizes that we should not go so fast in our positive outlook. On the other hand, his re-emphasis on holding the interest rate around the current level clears that we should not expect any changes for the next two quarters, at least and probably FED will go to “wait and see” policy, to examine the results of current actions.


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