- The Fed cutting rates doesn’t lead to more employment and inflation like it used to
- 2008 and 2020 the Fed cut short-term rates to zero
- When short-term rate are zero, Fed can buy assets like Treasuries and mortgage securities to make longer-term rates lower
- Comparison to Great Recession: stronger economy (job growth), stronger household balance sheets (low debt service burdens), stronger housing positions (appreciation), stronger mortgage markets (less subprime and more GSE market share), different economic disruption.
- Policy response = provide liquidity to borrowers
- As expected, forbearance programs has directly led to lower delinquencies
- Fed programs are working but are not meant to last forever