Federal Reserve Chair Says “We Won’t Run Out of Money”, Bitcoin Up 20% in 24 Hours

Siamak Masnavi

On Thursday (April 29), Federal Reserve Chair Jerome H. Powell explained what the central bank of the U.S. is currently doing and what it is prepared to do in the future to help the U.S. economy fight the economic impact of the COVID-19 pandemic.

At 14:00 EDT (or 18:00 UTC) on April 29, the Federal Reserve (aka "The Fed") issued a press release that contained a statement from the Federal Open Market Committee (FOMC), a committee within the Federal Reserve System that "is charged under United States law with overseeing the nation's open market operations."

In this statement, the FOMC said that:

  • The Fed is ready to use "its full range of tools" to support the U.S. economy.
  • COVID-19 and the lockdown measure introduced to contain its spread are "inducing sharp declines in economic activity and a surge in job losses."
  • Consumer price inflation is being held down by "weaker demand and significantly lower oil prices."
  • The COVID-19 crisis "will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term."
  • The FOMC has decided to "maintain the target range for the federal funds rate at 0 to 1/4 percent", and this target range will be maintained until the FOMC is "confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."

Less than two hours later, the Fed Chair hosted the first FOMC virtual press conference, a video recording of which is available on the Fed's YouTube channel.

The press conference started with some opening remarks from Fed Chair Powell, a few of which have been are highlighted below:

  • "The forceful measures that we as a country are taking to control the spread of the virus have brought much of the economy to an abrupt halt."
  • "Next week’s jobs report is expected to show that the unemployment rate, which was at 50-year lows just two months ago, has surged into double-digits."
  • "... economic activity will likely drop at an unprecedented rate in the second quarter."
  • "... lowering interest rates cannot stop the sharp drop in economic activity caused by closures and other forms of social distancing."
  • "Preserving the flow of credit is thus essential for mitigating the damage to the economy and setting the stage for the recovery."
  • "To support the flow of credit to households and businesses, foster smooth market functioning, and promote effective transmission of monetary policy to broader financial conditions, we have been purchasing large amounts of Treasury and agency mortgage-backed securities."
  • "We are also undertaking programs to provide stability to the financial system and to more directly support the flow of credit in the economy—for households, for businesses of all sizes, and for state and local governments."
  • "I would stress that these are lending powers, and not spending powers. The Fed cannot grant money to particular beneficiaries."
  • "... direct fiscal support may be needed. Elected officials have the power to tax and spend and to make decisions about where we, as a society, should direct our collective resources."

This was followed by a question and answer (QA) session that allowed journalists to ask Powell some questions.

Around 20 minutes after the start of the QA session, Victoria Guida, a financial services reporter from Politico, asked Powell about the Fed's lending plans and whether Republicans should be concerned about the huge amount of fiscal spending being done by the federal government.

Powell replied:

"This is different from the PPP that paycheck protection program in two ways. One, these are not grants, these are loans... 

"And the second thing is we won't run out of money. You know, it's not a limited pot. So, there won't be this incentive to try to get there first and that sort of thing...

"In terms of fiscal concerns... I have long time been an advocate for the need for the United States to return to a sustainable path from a fiscal perspective at the federal level.

"We have not been on such a path for some time, which means that the debt is growing faster than the economy. This is not the time to act on those concerns. This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer run productive capacity of the economy as possible."

"The time will come again -- and reasonably soon, I think -- where we can think about a long-term way to get our fiscal house in order, and we absolutely need to do that, but this is... not the time to let that concern, which is a very serious concern, get in the way of us winning this battle."

In light of the current stance of the Fed and comments such as those above from Fed Chair Powell, it is perhaps not too surprising to see that at the time of writing (05:06 UTC on April 30), according to data from CryptoCompare, BTC-USD is trading at $9,442, up nearly 20% in the past 24-hour period:

BTC-USD 24 Hour Chart on 30 Apr 2020.png

For a detailed explanation of Bitcoin's incredible pre-Halving price rally, it is worth reading an article published yesterday by CryptoGlobe shortly after the news about results form two clinical trials of Gilead's COVID-19 drug Remdesivir came out, but here is the closing paragraph from that article:

"So, if we take all the positives for the Bitcoin market mentioned in Krüger's analysis and add to it the good news about the trials of COVID-19 drug remdesivir, the readiness for virtually unlimited quantitative easing (QE) -- i.e. money printing -- from the world's major central banks, especially the Federal Reserve, and the planned gradual re-opening of the U.S. economy (helped by a big improvement in testing for the coronavirus), we end up with a reasonable explanation for today's explosive rally in the Bitcoin market."