By Michael S. Derby

The Federal Reserve's efforts to keep financial markets moving earlier this year as the coronavirus pandemic beg

an to strike did what they were supposed to do and have helped put the economy on a path toward recovery, Federal Reserve Bank of New York leader John Williams said Tuesday.

"The resilience of the U.S. banking system in particular has been a key factor in positioning our economy for a strong recovery, despite the enormous challenges posed by the pandemic," Mr. Williams said in the text of a speech.

In his remarks, Mr. Williams said as markets ran into deep trouble last March, the Fed swung into action to help stabilize the financial system.

"Our approach was to deliver a rapid and overwhelming response that would give assurance to market participants that liquidity would be there in the coming days and months," Mr. Williams said.

"These actions, combined with the introduction of emergency lending facilities to provide liquidity to funding and credit markets, proved successful," Mr. Williams said, adding "they quickly restored market functioning and averted what could have been a much more severe pullback from markets and the flow of credit to households and businesses."

Mr. Williams explained that "rapid" rebound in markets brought about by Fed action "helped restore a robust flow of credit at historically low interest rates to the economy, which has provided a boost for the recovery."

Mr. Williams noted in his remarks that the Fed was created first and foremost to ensure financial stability, and he added that as effective as the response to the current crisis has been, not all troubles can be planned and prepared for.

"We should not fool ourselves that we can design a system that is bulletproof against every circumstance," Mr. Williams said. Against those uncertainties, "events of the past year have demonstrated the critical role central banks can and must play in extraordinary times when market stress and dysfunction threaten to spill over into the economy."

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

September 29, 2020 09:30 ET (13:30 GMT)

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