Federal Reserve Chair Jerome Powell said Wednesday that both the central bank and Congress will likely need to do more to support the economy and promote a strong recovery from the coronavirus crisis.
Powell emphasized that the Fed, which slashed its benchmark interest rate to near zero last month and left them there on Wednesday, is “committed to using our full range of tools to support the economy in this challenging time.” He pledged that the Fed would act “forcefully, proactively and aggressively” until the economy is on a path to recovery.
“We can continue to be part of the answer,” Powell said. “Will there be a need to do more, though? I think the answer to that will be yes.”
Powell added that Congress had also responded aggressively to the pandemic with the CARES Act and other relief legislation, but that “it may well be the case that the economy will need more support from all of us if the recovery is to be a robust one.”
Powell noted that Congress could mitigate long-run damage to the economy by enacting policies that help protect companies and households from “avoidable insolvency” and allow businesses to keep their workers.
‘Time to Use the Great Fiscal Power of the United States’: The Fed chair has in the past warned about the risks of rising U.S. deficits, but after some Republicans have cited those concerns in recent days in calling for caution about additional coronavirus spending, Powell on Wednesday said that the federal debt burden shouldn’t be the focus now.
“I’ve have for a long time been an advocate for the need for the United States to return to a sustainable path from a fiscal perspective at the federal level,” Powell said. “This is not the time to act on those concerns. This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible. The time will come again, and reasonably soon I think, where we can think about a long-term way to get the fiscal house in order, and we absolutely need to do that. But, in my personal view, this is not the time to let that concern, which is a very serious concern, to let that get in the way of us winning this battle.”
The Fed has taken unprecedented steps to support the economy, buying up trillions of dollars in bonds as it seeks to ensure markets continue to function and bolster businesses, states and municipalities. The Fed also said Wednesday that it would leave rates near zero until the economy is back to full employment and inflation rises to around its long-standing 2% target.
“Both the depth and duration of the economic downturn are extraordinarily uncertain, and will depend in large part on how quickly the virus is brought under control,” Powell said.