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July 16, 2020

Key Takeaways from President Williams’s Speech on Central Banking, Financial Markets, and the Pandemic

On Thursday, July 16, New York Fed President John Williams spoke at the 16th Meeting of the Office of Financial Research’s Financial Research Advisory Committee about the Federal Reserve’s response to the current financial crisis.

He said:

“[S]afeguarding the functioning of financial markets is essential for the health of the broader economy.”

“If credit isn’t flowing, people can’t finance the purchase of a home, businesses can’t invest, and nonprofit organizations and municipalities can’t keep essential services going.”

“Although the facilities differ in important ways, reflecting the specifics of markets and sectors, they all share the goal of keeping credit flowing to households, businesses small and large, and other key segments of the economy.”

President Williams focused his remarks on the measures taken by the Federal Reserve “to promote the stability of the financial system and to support the flow of credit.” He said, “Ensuring liquid and smoothly functioning financial markets are essential roles of central banks, like the Federal Reserve.”

Describing the events of recent months he said, “Markets for Treasury securities and agency mortgage-backed securities, which are normally highly liquid and form the bedrock of our financial system, nearly buckled under the strain of massive flows of funds in response to the pandemic.” Turning to the Fed’s response, he said that in addition to large-scale repo operations and asset purchases, the central bank has “established a number of programs to support the flow of credit to households, businesses, and state and local governments.”

President Williams highlighted that, “Since the announcements and rollouts of the various facilities, we have seen a significant improvement in the pricing and availability of credit.” He said the existence of the facilities “has helped boost confidence to the point where borrowers are able to access credit from the private market at affordable rates.”

He concluded his remarks by saying, “These are unprecedented times, and the pandemic presents truly unique challenges.” But that, “Severe crises demand innovative and decisive responses, and the Federal Reserve is striving to deliver just that.”

Read the full speech.

This article was originally published by the New York Fed on Medium.

The views expressed in this article are those of the contributing authors and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.


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