Fed's Kaplan says small businesses need more financial help - Metro US

Fed’s Kaplan says small businesses need more financial help

FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan speaks during an interview in his office at the bank's headquarters in Dallas

(Reuters) – The Federal Reserve’s emergency lending facilities have been largely effective at stabilizing financial markets without needing a large investment, but small- and medium-sized businesses need more assistance, Dallas Fed President Robert Kaplan said on Thursday.

Some small businesses that were struggling financially will fail because of the resurgence in coronavirus infections, and small businesses in the service sector will take the biggest hit, Kaplan said during an online webinar with the Official Monetary and Financial Institutions Forum Foundation.

“One area where financial conditions are not loose and we are seeing stress is in small, mid-sized businesses, particularly those in person-to-person contact industries,” Kaplan said. “I think there is probably a debate to be had, what can we do to continue to help small businesses.”

Supporting small businesses that would be viable were it not for the epidemic can help to “manage” the unemployment rate and reduce the number of people who lose their jobs, Kaplan said.

He said the Fed still has “plenty of fire power” to support the economy, but repeated his view that the pace of the economic recovery will depend on the management of the virus and whether people wear masks.

As for the tools the Fed should consider, Kaplan said he was still skeptical about the idea that the U.S. central bank should adopt yield curve control, which would target interest rates at specific maturities.

“I’m going to keep an open mind about it,” Kaplan said. Still, he said he is “sensitive to actions we might take that further muffle the pricing signals of markets or distort the pricing signals of markets.”

Kaplan also said the Fed’s asset purchases “are not free” and could ultimately threaten the status of the U.S. dollar as a reserve currency.

(Reporting by Jonnelle Marte; Editing by Chris Reese and Paul Simao)

More from our Sister Sites