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Fed President Kaplan: Asset Purchases Are Not Free

Asset Purchases

EDITOR NOTE: Three key points from Fed President Kaplan: the healthcare crisis leads economic recovery, not the other way around; federal aid has been helpful, except for small to mid-sized businesses (which make up the “backbone” of the US economy); and Fed asset purchases will negatively affect the US dollar. These three critical areas, which most investors seem to be ignoring, are key to maintaining their fundamental economic health. What happens when you ignore the essentials?

Dallas Federal Reserve Bank President Robert Kaplan said on Thursday that he doesn't believe that the Fed's future policy will include negative interest rates.

Additional takeaways

"This downturn is different than others because a substantial portion of the population was not working."

"It's still my view that the US economy will grow at a healthy rate in Q3 and Q4 but rebound won't be as pronounced because of the resurgence of the virus."

"If we all wear masks we can manage infections without locking down except in certain cases."

"Monetary policy and fiscal policy are only a bridge to managing the health care crisis."

"One area where aid hasn't been as effective is help to small and mid-sized businesses."

"Fed's asset purchases are not free and may ultimately have an effect on the dollar, don't want to do more than we have to."

"Concerned about the growth of US government debt and the implications this has for the US."

"Rates are going to stay low until we make more progress on goals of maximum employment and price stability."

Market reaction

The US Dollar Index edged higher in the last minutes and was last seen gaining 0.25% on a daily basis at 93.03.

Originally posted on FXStreet

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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