Washington DC, June 16, 2020 – A full U.S. economic recovery will not occur until the American people are sure that the novel coronavirus epidemic has been brought under control, Federal Reserve Chair Jerome Powell said on Tuesday as he began the first of two days of hearings before U.S. lawmakers.
“Until the public is confident that the disease is contained, a full recovery is unlikely,” Powell said in prepared testimony to the Senate Banking Committee as he mapped out how the United States faces an uncertain, uneven and prolonged economic recovery from the novel coronavirus crisis.
The Fed last week kept interest rates unchanged near zero and made clear it plans years of extraordinary stimulus as the nation grapples with steps toward fully reopening its economy amid state and local surges in cases, and with no vaccine in sight.
“The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures,” Powell said.
Congress has so far allocated nearly $3 trillion in financial relief, including direct payments to households and a forgivable loan scheme for small businesses, while the Fed has implemented numerous programs to pump trillions of dollars of credit into the economy.
On Monday, the Fed launched its long-awaited Main Street lending program, which will offer up to $600 billion in loans to U.S. businesses with up to 15,000 employees or with revenues up to $5 billion.
But as Powell reiterated on Tuesday, there will be no quick fix to healing the economy and he repeated that the Fed will use its full range of tools to help it recover. He also said that direct financial support to families and businesses makes “a critical difference” in limiting long-lasting damage.
Powell and other Fed officials have increasingly said Congress may need to do more to prevent long-term economic scarring and the Fed warned in its semi-annual report to lawmakers on Friday that it expects households and businesses to suffer “persistent fragilities.”
There are currently roughly 20 million people unemployed as a result of the epidemic, which has killed more than 115,000 people in the United States, with minority communities among those hardest hit on both fronts.
“If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing,” Powell, who will also appear before the House Financial Services Committee on Wednesday at 12 p.m. EDT, said in his prepared remarks.
Fed officials currently forecast the economy shrinking at a 6.5% annualized rate in 2020 and see unemployment remaining elevated for several years. Powell has previously said he sees millions, particularly low-wage workers, remaining out of work for the foreseeable future with no easy re-entry into employment. – Reuters