Powell stresses imperative of curbing coronavirus for US economic rebound

FEDERAL Reserve Chair Jerome Powell stressed to Congress Tuesday that getting the coronavirus under control was vital as the US economy rebounds from the sharpest contraction on record.

“We have entered an important new phase and have done so sooner than expected,” Mr. Powell told the House Financial Services Committee while wearing a face mask in a joint appearance with US Treasury Secretary Steven Mnuchin. “While this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”

Parts of the US are taking steps to scale back reopenings amid a fresh surge in infection rates, with Arizona closing bars and New Jersey halting plans for indoor dining. Massive monetary and fiscal policy stimulus have been unleashed to support the US economy during the pandemic, but signs the crisis may linger longer will increase pressure for more aid.

Lawmakers pressed Mnuchin on government support for small businesses through the Paycheck Protection Program. The deadline to apply for a forgivable loan under PPP is Tuesday and the Treasury secretary said that money left in fund can be repurposed by Congress for restaurants and hotels. The travel and leisure industry is among those hardest hit by the pandemic, he said.

The Fed has slashed interest rates to zero and worked with Treasury to launch nine emergency lending programs aimed at providing a credit backstop to everything from municipalities to medium-sized businesses.

In addition to monetary stimulus, US lawmakers have also approved almost $3 trillion in taxpayer support including direct assistance to small businesses and enhanced unemployment insurance for the many millions of workers who’ve lost jobs since the virus struck.

House Democrats questioned Powell and Mnuchin on ways to find more aid for state and local governments and how to more strongly tie government support to jobs.

“We can see ourselves possibly lowering the threshold again,”

Mr. Powell said in reference to the Fed’s Main Street lending facility for small- and medium-sized businesses. “Just logistically for us to be making very, very small loans would be difficult.”

Mr. Powell acknowledged that banks aren’t getting “a ton of interest” yet from borrowers on the Main Street loans. “Many of them say they expect that’ll change over the course over the next few months,” said Powell. The Fed is open to making some changes to the program’s formula, if needed, he said.

Mr. Mnuchin reiterated at the hearing the administration’s goals to pass another round of fiscal stimulus by the “end of July.”

Economists caution that a long period of labor reallocation — where workers in an industry directly impacted by the virus such as lodging have to find new skills and jobs in other industries — risks keeping unemployment high for years.

The Fed chair in his remarks to lawmakers struck an optimistic note on what he is seeing as economic activity resumes. Hiring is picking up, he noted, and spending is increasing, though he cautioned that 20 million Americans have lost their jobs.

“The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” he said. “A full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”

As he has in recent appearances, Powell also warned against pulling back on any form of stimulus too soon.

“The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed,” he said. —