Monetary and fiscal policies in the United States

Abstract

The US has been hit hardest by the COVID-19 pandemic and both human lives and livelihoods have been severely affected. This chapter examines the monetary and fiscal policy measures the US authorities have implemented in order to cope with the COVID-19 Crisis. The Fed responded proactively by introducing new credit facilities, including the Main Street Lending Program, to support the most vulnerable sectors while maintaining the smooth functioning of financial markets. Fiscal measures – larger than those delivered during the Global Financial Crisis – include income tax rebates and enhanced unemployment benefits and helped lessen the lasting effects caused by the shutdown in economic activity. While these policies have brought some success in cushioning the adverse impacts of the pandemic, the massive monetary and fiscal policy measures entail substantial risks associated with low-for-long interest rates and a soaring debt level.