Chairman Powell’s testimony to the House Financial Services Committee this afternoon has several components and goals, which are all consistent with his recent remarks…THREAD

1. Reinforce Fed credibility --

Demonstrate that the Fed empathizes with the American public and is pulling out all the stops to stanch the bleeding and initiate the recovery. The Fed will not pull back prematurely

2. Temper expectations about a quick recovery --

The economy can’t recover until confidence is restored --> confidence is unlikely to be restored until the virus is under control --> hasty reopenings can push that back

3. Explain the Fed’s actions to Congress --

Credit programs are being deployed responsibly and transparently, under direct authority from Congress and the Treasury

4. Implicitly call for further congressional action --

Lots of carefully crafted lines: complementing lawmakers for their response to date; Fed actions “only part of broader public-sector response”; direct support can make a “critical difference”

Powell often supplements the call for additional fiscal policy with the powerful line, “The Fed has lending powers, not spending powers.” Likely to come out in the Q&A, as many House Dems will probably ask him about this subject

Bottom line: Powell would not be wading into a legislative debate to strongly suggest the need for additional deficit spending if he didn’t believe there was *serious* downside risk to households, businesses, and the economy from Congress failing to pass another fiscal package