AILSA CHANG, HOST:

The Federal Reserve has two missions. The first - manage inflation, which is not a problem right now. The second mission is keep unemployment down, which is a gigantic task during an economic cataclysm. So what can the Fed do to inject life into the economy, and are they doing it? To give us a bit of a report card on the Fed's actions, we're joined now by Julia Coronado. She is a former economist at the Federal Reserve and now president at Macropolicy Perspectives. Welcome.

JULIA CORONADO: Thank you very much.

CHANG: So I want to start out by playing a bit of a speech that Fed chair Jerome Powell gave this week.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: Both the depth and the duration of the economic downturn are extraordinarily uncertain and will depend in large part on how quickly the virus is brought under control. The severity of the downturn will also depend on the policy actions taken at all levels of government to cushion the blow and to support the recovery when the public health crisis passes.

CHANG: So, Julia, my first question is one of tone. Is Powell getting the tone right during this crisis? What do you think?

CORONADO: I think he's done a very good job getting the tone right. He is both calm but also very forceful in terms of the seriousness with which he's taking the situation and the aggressiveness and the reassurance he's providing on the policy front. So I think he's - he definitely gets an A on tone.

CHANG: OK. Turning now to the actual actions the Fed has taken so far during this pandemic, you know, the Fed dropped interest rates down to zero back in early March. Do you think that was the right move at the right time?

CORONADO: Yes, I do. I think one of the things that they learned from the last crisis that we went through in 2008 and 9 is that you don't wait around to see how bad things will get. You - when you know that things are going to be very bad, you act quickly and forcefully. So they went straight to zero on interest rates, and I think that was the right move.

CHANG: That said, though, before this crisis, you know, President Trump had put pressure on the Fed to keep rates low, to cut them even more. And that was despite a pretty great economy at the time, which means that rates were already quite low when drastic measures were needed for this pandemic. So do you think the Fed would have had more tools to help the economy with if they had not kept rates so low before the pandemic?

CORONADO: Actually, generally speaking, the Fed had resisted that kind of political pressure. And if we look around the world, interest rates are low everywhere for a lot of structural reasons - because economic growth has slowed, because inflation is very low everywhere. Those are the sort of structural pressures that mean that on a - even in a good economy, interest rates are going to be lower now than they were in the past. So that's out of the Fed's control.

CHANG: OK. We have heard a lot about Congress' program to help small businesses, but the Fed has a program as well. It announced yesterday that it is expanding the Main Street Lending Program. Can you quickly explain how that program stacks up against what Congress has come up with?

CORONADO: So what Congress has done is done a program extending credit to small businesses, and that - those loans will convert into grants if businesses use them to pay their employees. The Fed can't give out money. It can lend money. And so for the medium-sized businesses that can access the Main Street facility, they can take out loans from the Fed, pay them back over a number of years. And that gives them a bridge through this crisis.

CHANG: OK. And in just the quick moment we have left, is there anything you'd like to see the Fed do that it has not done so far?

CORONADO: I think I'd like to see the Fed encourage banks to work more with their customers and giving them forbearance on their loans. A break on payments goes a long way when your income is interrupted.

CHANG: All right, that is Julia Coronado. She's a former economist at the Federal Reserve and now the president of Macropolicy Perspectives. Thank you very much for joining us.

CORONADO: My pleasure. Transcript provided by NPR, Copyright NPR.