Fed Policy and US Policy Responses

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

US Policy Responses to Labor Market Distress

• High unemployment can draw comparison to Great Depression.
• But swift policy initiatives now contrast with initial hesitation in 1930s.
• New fiscal spending may focus on getting people back to work.
• Even with massive policy support, rebuilding could be gradual.

Fed Policy Responses

• Fed acted swiftly to inject liquidity into the financial system.
• Numerous banks failed due to Fed inaction in 1930s meltdown.
• Fed is using 2008 playbook to mitigate impact of COVID-19.
• Budget deficit is set to widen to $4 trillion by end of 2021.