Dow plummets more than 800 points
Here’s some shocking Federal Reserve news.
Bill Dudley, former President of the New York Fed, said the central bank’s toolbox to support the economy is almost empty.
No central bank wants to admit that it’s out of firepower. Unfortunately, the US Federal Reserve is very near that point,” Dudley wrote in a Bloomberg opinion piece.
Investors and economists have rested assured that the Fed would do whatever necessary to keep markets functioning and the recovery going throughout this crisis. So if that has changed, it’s a really big deal.
The Fed cut interest rates to near zero in March and intends to leave them there for years — and it has rolled out numerous stimulus facilities.
Sure, there are more complex things the Fed can do, such as turning interest rates negative. “But,” Dudley said, “this misses a crucial point. Even if the Fed did more — much more — it would not provide much additional support to the economy. Interest rates are already about as low as they can go, and financial conditions are extremely accommodative.”
So then what?
Well, the Fed should still commit to doing all that it can, Dudley said, but it should be very clear that monetary policy can only accomplish so much.
“It’s up to legislators and the White House to give the economy what it needs —and right now, that means considerably greater fiscal stimulus,” he said.
