Tags: Coronavirus | fed | powell | aid | economy

Fed's Powell Beats Drum for More Government Aid to Bolster Economy

Federal Reserve Chair Jerome Powell (Drew Angerer/Getty Images)

Wednesday, 17 June 2020 03:40 PM

The U.S. economy is beginning to recover from the worst of the coronavirus crisis, but with some 25 million Americans displaced from work and the pandemic ongoing, it will need more help, Federal Reserve Chair Jerome Powell told lawmakers on Wednesday.

"We at the Fed need to keep our foot on the gas until we are really sure we are through this, and that's our intention, and I think you may find that there's more for you to do as well," Powell said in testimony via a video link to the U.S. House of Representatives Financial Services Committee.

"It would be a concern if Congress were to pull back on the support that it's providing, too quickly," he said.

With the road back from recession likely to take some time, Powell said interest rates will likely need to stay near zero for "an extended period" and the U.S. central bank will continue to buy bonds to push down on longer-term borrowing costs.

But the Fed chief, who also testified before the Senate Banking Committee on Tuesday, noted that Congress must also do its part.

Referring to people whose jobs will be slow to return, such as those employed in the travel and restaurant sectors, Powell said it was "better to keep them in their apartment, better to keep them paying their bills."

"We should find ways as a country to support those people and help them through this difficult part of their lives," he said.

It will be particularly important, Powell said, for Congress to extend in some form the extra $600 weekly payments to the unemployed that were part of a relief package passed in March and that will expire in July. "You would not want to go all the way to zero on that," he said. State and local governments, as well as small businesses, also will need some aid, he said.

Congress has allocated nearly $3 trillion for coronavirus-related economic aid and the U.S. central bank has pumped trillions of dollars of credit into the economy to cushion it from the fallout from the pandemic.

But some Republicans have been resistant to doing more quickly, especially after a rebound in job growth and retail sales in May.

Representative Patrick McHenry, a Republican, appeared to chide Powell gently for his remarks, saying "monetary and fiscal policy are two very different things - and so I would urge you and the leadership of the Fed to stick to monetary policy." 

Meanwhile, Cleveland Federal Reserve Bank President Loretta Mester said the economy could face a record decline in the second quarter and the strength of the recovery will largely depend on the success of efforts being made to limit the spread of the coronavirus.

Private-sector forecasts call for the gross domestic product in the second quarter to decline by an annual rate of 25% to 40%, Mester said in remarks prepared for a virtual forum. "Second-quarter growth could be the largest quarterly decline on record," she said.

Mester noted that unemployment remains at historically high levels despite the improvement seen in May, when the economy added 2.5 million jobs. She said the hit to the labor market may be worse than the numbers suggest, because many people left the work force and other workers had their hours cut.

The policymaker said she expects inflation to decline this year because of the sharp drop in demand caused by pandemic-related shutdowns.

The strength of the recovery will depend on the future spread of the virus and if consumers feel comfortable going out in public, she said.

"If the number of cases of the virus is not well controlled and the health-care system gets overwhelmed, then the economic outcomes I have discussed could turn out to be much more dire," Mester said, adding that people may choose to stay home and limit their activity even if states do not put in place another wave of restrictions. 

© 2020 Thomson/Reuters. All rights reserved.


   
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Economy
The U.S. economy is beginning to recover from the worst of the coronavirus crisis, but with some 25 million Americans displaced from work and the pandemic ongoing, it will need more help, Federal Reserve Chair Jerome Powell told lawmakers on Wednesday.
fed, powell, aid, economy
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2020-40-17
Wednesday, 17 June 2020 03:40 PM
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