Federal Reserve Chairman Jerome Powell warned Wednesday of the threat of a prolonged recession as a result of the viral outbreak and urged Congress and the White House to do even more to prevent lasting economic damage.
The Fed and Congress have taken far-reaching measures to try to counter what is likely to be a severe recession as a result of the widespread shutdown of the U.S. economy. But Powell warned that widespread bankruptcy among small businesses and prolonged unemployment for many people remain a serious risk.
“We have to do our best to avoid these results,” Powell said.
Millions of Americans who can qualify for unemployment are struggling to run
04:47
The additional aid to bail out government spending or fiscal policies, while costly, “would be worthwhile if it helps prevent long-term economic damage and leaves us with a stronger recovery,” he said.
Powell spoke a day after House Speaker Nancy Pelosi, a Democrat from California, proposed to $ 3 trillion aid package which would direct money to small businesses, state and local governments, and other besieged institutions. That money would add to the $ 3 trillion in previous financial aid that the government has provided. The Fed itself has also intervened by lowering interest rates to near zero and creating numerous emergency loan programs.
However, Trump administration officials have said they want to see how the previous aid packages affect the economy. And Republican leaders in Congress have expressed skepticism about allowing more significant spending right now.
“The deepest and longest recessions can leave behind lasting damage to the productive capacity of the economy,” the president warned in his prepared remarks before holding an online discussion with the Peterson Institute for International Economics. “Avoidable domestic and business insolvencies could affect growth over the next few years.”
He said the Fed “will continue to use our tools to the fullest” until the viral outbreak subsides, but gave no indication of what the Fed’s next steps might be.
Atlanta Fed chief says new employment reports “will be difficult”
07:42
Powell repeated your previous notices that the Fed can lend money to solvent companies to help them overcome the crisis. But a longer fall could threaten the bankruptcy of previously healthy companies without further government assistance.
Powell’s poor vision contrasted with a speech by Charles Evans, president of the Federal Reserve Bank of Chicago. Evans outlined a more optimistic view and suggested that “it is reasonable to assume a legitimate return to growth in the second half” of this year and 2021.
In his remarks on Wednesday, the Fed chairman highlighted some of the harsh impacts of the recession. Among those working in February, nearly 40 percent of households earning less than $ 40,000 a year lost their jobs in March, Powell said.
- In:
- Jerome Powell
- Economy
- Bankruptcy
- COVID-19[feminine]
- Federal Reserve
Add Comment