WASHINGTON – The US economy will only recover from the coronavirus downturn when people feel safe to resume their normal activities, Federal Reserve chairman Jerome Powell said in remarks released on Monday (Sept 21) ahead of congressional testimony.
The central bank chief is set for three days of testimony before House and Senate committees starting Tuesday on the response to the coronavirus downturn, which has caused tens of millions of job losses and a record plunge in annualized GDP in the second quarter due to business shutdowns to stop the virus’s spread.
Though some sectors of the economy, such as retail sales and housing, have seen sharp rebounds, viral infections remain rife and Congress is deadlocked on additional spending to help the recovery.
“A full recovery is likely to come only when people are confident that it is safe to reengage in a broad range of activities,” Mr Powell will tell House Financial Services committee members on Tuesday in an appearance with Treasury Secretary Steven Mnuchin, according to the prepared remarks.
“The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.”
The central bank rolled out trillions of dollars in liquidity and slashed its key interest rate to near-zero as the pandemic hit, while saying it can do more if needed.
However the Fed can only lend, not spend.
And Mr Powell has repeatedly called for more support for the economy, but despite weeks of talks, there have been few signs of progress in negotiations between Democrats and Republicans in Washington.
Lawmakers approved the US$2.2 trillion (S$3 trillion) Cares Act in March as the pandemic struck, which included extra payments to the unemployed and a program of loans and grants for small businesses, but those programs have expired in recent weeks.
On Monday, White House economic advisor Larry Kudlow said the country was seeing a “self-sustaining, strong” recovery that might not require more stimulus.
“I do not think the recovery is contingent on that assistance package,” Mr Kudlow said.