U.S. Fed will 'push hard against negative interest rates': CIBC's Bipan Rai
Federal Reserve Chair Jerome Powell said the U.S. economy has a long way to go before fully recovering from the coronavirus pandemic and will need further support.
“The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” he told the House Financial Services Committee on Tuesday. While a recovery is underway, “both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.”
Read More: Powell and Mnuchin Set to Get Grilled on Need for More Stimulus
In his own remarks, U.S. Treasury Secretary Steven Mnuchin said he and the White House continue to seek an agreement with both parties in Congress on another fiscal relief package.
“The President and I remain committed to providing support for American workers and businesses,” he said in testimony released Tuesday. “I believe a targeted package is still needed, and the administration is ready to reach a bipartisan agreement.”
Powell and Mnuchin’s appearance is a quarterly exercise mandated by the Cares Act passed by Congress in March, which appropriated about US$2 trillion to help speed the U.S. recovery. The pair are likely to face questions about their use of Cares Act funds and about what else should still be done.
Prospects for another round of fiscal support have further dimmed amid spiraling partisan tension over the battle to replace Supreme Court Justice Ruth Bader Ginsburg, with just 42 days remaining before the U.S. election.
Powell was prepared for questions about the Fed’s troubled Main Street Lending Program, a US$600 billion facility aimed at providing credit to small- and mid-sized companies. He said Fed officials had responded to feedback by making adjustments to the program.
Still, he added, “Main Street loans may not be the right solution for some businesses, in part because the Cares Act states clearly that these loans cannot be forgiven.”
The Fed has come under criticism for the low take-up so far from the Main Street program. It has so far purchased just US$1.5 billion in loans, as of Sept. 16. Some banks, especially larger institutions, have balked at lending through the program to the riskier businesses that may need them the most.