Federal Reserve Chair Jerome Powell said in a speech yesterday that the central bank will continue its asset purchases and dovish inflation stance, while, at the same time, he repeated calls for the government to pass a new stimulus measure for the sake of the economy.

Since the pandemic's early stages, the Federal Reserve has propped up credit markets by pledging to buy a range of assets in as large a quantity as is needed to stabilize the economy, including U.S. Treasuries. Powell said that, over coming months, the Fed will continue to increase its holdings of Treasury securities and agency mortgage-backed securities (MBS) at least at the current pace. At this point, the "current pace" is $120 billion per month: $80 billion in Treasuries and $40 billion in agency MBS.

"We believe these purchases, along with the very large purchases made to preserve financial stability in the depths of the crisis, have materially eased financial conditions and are providing substantial support to the economy," said Powell. "Looking ahead, we will continue to monitor developments and assess how our ongoing asset purchases can best support our maximum employment and price stability objectives, as well as market functioning and financial stability."

Meanwhile, around the end of August, the Fed announced a seismic shift in its longstanding inflation policy. While the central bank has generally tried to keep inflation no higher than 2 percent, it now sees that figure as more of a moving target rather than a hard-and-fast line in the sand. The Fed now seeks an inflation rate that averages 2 percent over time, meaning that rates over this mark will be tolerated, provided that the rate eventually smooths out to the average target. Powell, in his recent speech, said that with inflation still well under 2 percent, it has not changed its stance on the new policy.

He also said that interest rates would remain at the current 0 to 0.25 percent level "until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time."

Powell also gave a warning that, while the Fed still has the power to help the economy, there is only so much it can do through monetary policy alone. He repeated his calls for the government to pass a new stimulus measure, for the sake of the economic recovery, adding that one of the mistakes of the last crisis was trying to be austere when the economy really needed money.

"So I think all of us lived through the experience of the—of the years after the global financial crisis," he said. "And for a number of years, there in the middle of the recovery, fiscal policy was pretty tight. And I think I just would say that I think we'll have a stronger recovery if we can just get at least some more fiscal support when it's appropriate, you know, when it's appropriate and the size Congress thinks it's appropriate."

While negotiations for a new round of stimulus spending ultimately collapsed before  Election Day, the New York Times is reporting that there might be hope for a bill sometime during the lame duck session this winter. Senate Majority Leader Mitch McConnell (R-Ky.) said that an aid bill would be "Job One" for returning legislators, though the Times said that the size of it will likely be far less than what the White House had agreed to before the election.