Jerome H Powell: New economic challenges and the Fed's monetary policy review

Speech (via webcast) by Mr Jerome H Powell, Chair of the Board of Governors of the Federal Reserve System, at "Navigating the Decade Ahead: Implications for Monetary Policy", an economic policy symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 27 August 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Good afternoon. It's great to be with you, and I look forward to our discussion. As you all know, the COVID-19 pandemic has caused significant disruption and hardship in nearly every aspect of our lives, and it continues to weigh heavily on our national economy, which is why it will be the central focus of my remarks here today. Let me set the stage for our discussion by outlining the economic effects of the pandemic most relevant to the banking sector, describing the Federal Reserve's response to the crisis, and then making some observations about conditions for smaller banks.

The Pandemic's Effects on the Economy and Banking

We began this year with the economy in excellent shape-by some measures the strongest in decades. From my seat as a monetary policymaker, we appeared to be in a good position regarding both legs of our dual mandate, which are maximum employment and stable prices.

But that picture was dramatically altered with the onset of the COVID-19 pandemic. Efforts to contain the spread of the virus caused a sudden stop in economic activity during March and April. While the extent of the closures and shutdowns varied widely throughout the country, the sudden loss of employment and the contraction in output were like nothing our nation has experienced before.