The U.S. economy is beginning to recover from the worst of the coronavirus crisis, but with some 25 million Americans displaced from work and the pandemic ongoing, it will need more help, Federal Reserve Chair Jerome Powell told lawmakers on Wednesday.
“We at the Fed need to keep our foot on the gas until we are really sure we are through this, and that’s our intention, and I think you may find that there’s more for you to do as well,” Powell said in testimony via a video link to the U.S. House of Representatives Financial Services Committee.
“It would be a concern if Congress were to pull back on the support that it’s providing, too quickly,” he said.
With the road back from recession likely to take some time, Powell said interest rates will likely need to stay near zero for “an extended period” and the U.S. central bank will continue to buy bonds to push down on longer-term borrowing costs.
But the Fed chief, who also testified before the Senate Banking Committee on Tuesday, noted that Congress must also do its part.
Referring to people whose jobs will be slow to return, such as those employed in the travel and restaurant sectors, Powell said it was “better to keep them in their apartment, better to keep them paying their bills.”
“We should find ways as a country to support those people and help them through this difficult part of their lives,” he said.
It will be particularly important, Powell said, for Congress to extend in some form the extra $600 weekly payments to the unemployed that were part of a relief package passed in March and that will expire in July. “You would not want to go all the way to zero on that,” he said. State and local governments, as well as small businesses, also will need some aid, he said.
His message was echoed later on Wednesday by Cleveland Fed President Loretta Mester, who said that while federal government support had been sizeable, so was the depth of the economic downturn.
“Further direct fiscal support will be needed for states and municipal governments and for households most affected by the pandemic,” Mester told the Council for Economic Education via video link. She also said there should be increased investment on testing, contact tracing and treatments to control the spread of the novel coronavirus.
Congress has allocated nearly $3 trillion for coronavirus-related economic aid and the U.S. central bank has pumped trillions of dollars of credit into the economy to cushion it from the fallout from the pandemic.
But some Republicans have been resistant to doing more quickly, especially after a rebound in job growth and retail sales in May.
Representative Patrick McHenry, a Republican, appeared to chide Powell gently for his remarks, saying “monetary and fiscal policy are two very different things - and so I would urge you and the leadership of the Fed to stick to monetary policy.”
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