Treasury Secretary Janet Yellen and Federal Reserve chair Jerome Powell will tell Senators on Tuesday the coronavirus delta variant has slowed economic recovery but they remain optimistic about the economy's overall direction, The New York Times reported.
Yellen and Powell will testify before the Senate Committee on Banking, Housing, and Urban Affairs.
"While our economy continues to expand and recapture a substantial share of the jobs lost during 2020 [pandemic], significant challenges from the delta variant continue to suppress the speed of the recovery and present substantial barriers to a vibrant economy," Yellen will say, based on remarks released Monday afternoon, The Times reported.
"Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year."
Yellen and Powell will appear before Congress as businesses face labor shortages and consumers cope with rising prices. Also, Democrats are working to pass President Joe Biden's $3.5 trillion spending package that many experts say will cost much more than that.
Lawmakers also are trying to extend federal funding to avoid a government shutdown, raise the debt limit to prevent defaulting on the nation's financial obligations, and pass a bipartisan $1 trillion infrastructure bill.
The Times said Yellen and Powell will have the opportunity to publicly encourage Congress to raise or suspend the debt ceiling, and to warn of the disastrous consequences should the country default on its obligations.
Yellen has said that a default would do irreparable harm to the economy. She has contacted Wall Street chief executives and former Treasury secretaries as she looks to keep markets calm, the Times said.
"It is imperative that Congress swiftly addresses the debt limit," Yellen will say. "The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession."
Powell also has worried about the debt limit, saying during a news conference last week that default is "just not something that we should contemplate," and that "no one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure, fully protect in the event of a failure to make sure that we do pay those debts when they’re due."
Powell, who will cite the COVID-19 pandemic as a risk to the economic recovery, will tell senators that the Fed will use its monetary policies to support the economy. However, he will add that Fed officials will act if prices continue to escalate.
"Inflation is elevated and will likely remain so in coming months before moderating," Powell will say.
Yellen and Powell will testify before the House Financial Services Committee on Thursday.
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