Virus poses lasting harm to U.S. economy, Powell says
Federal Reserve Chairman Jerome Powell said the central bank is prepared to use its full range of tools and leave the benchmark lending rate near zero until the economy is back on track.
“We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response,” Powell said in prepared remarks released Monday ahead of his virtual hearing before the Senate Banking Committee. “We expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals.”
Powell is scheduled to appear before lawmakers for a virtual hearing at 10 a.m. Tuesday in Washington with U.S. Treasury Secretary Steven Mnuchin at the Senate’s first quarterly CARES Act Report.
Working with the Treasury, the central bank has launched unprecedented support for markets and the economy since mid-March as U.S. businesses shuttered and Americans stayed home to limit the spread of the coronavirus. It has slashed interest rates to nearly zero and unveiled nine emergency lending programs, supporting everything from corporate to municipal credit markets as it tried to stabilize access to financing.
Powell has also nudged Congress to consider more fiscal support beyond the US$3 trillion in aid already passed, and has said the Fed is willing to do more if needed to support the economy.
“We’re not out of ammunition by a long shot,” the Fed chairman told CBS’s “60 Minutes” show in an interview aired Sunday. “We can enlarge our existing lending programs. We can start new lending programs if need be.”
Much of Powell’s prepared testimony was a review of programs put in place by the central bank.
For all the support, just about every indicator of the U.S. economy shows history-making declines as economic activity slammed into a sudden stop as households sheltered in place. Employers cut 20.5 million jobs last month, tripling the unemployment rate to 14.7 per cent, the highest since the Great Depression.
Powell said the scope and speed of the downturn “are without modern precedent and are significantly worse than any recession since World War II.”
The Fed is still trying to launch four of the nine facilities, including one aimed at Main Street that will buy bank loans extended to mid-size businesses. The facility is one of the riskiest and most challenging programs the Fed has undertaken given the diversity of businesses that are likely to borrow.