Fed chair says US needs more stimulus

Warning notes possibility of multiyear recession if more aid is not authorized

WASHINGTON — Federal Reserve Chairman Jerome Powell gave a dire warning Wednesday that the United States economy could become stuck in a painful multiyear recession if Congress and the White House do not authorize more aid to address the coronavirus pandemic’s economic fallout.

“Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said in a videoconference with the Peterson Institute for International Economics.

Powell’s statement was a sharp departure from the economic optimism that President Donald Trump and some senior administration officials have expressed in recent days, as they have suggested a dramatic economic rebound will occur later this year and pick up even more momentum in 2021. Powell’s outlook was far more grim and helped send the Dow Jones Industrial Average down 517 points, or 2.2%.

Asked about the need for more economic stimulus, Trump told reporters Wednesday, “I don’t know, it depends.”

But Powell sounded a much more urgent tone, describing the U.S. as in the midst of the “biggest shock our economy has felt in modern times” and likely to face an “extended period” of weakness.

“The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” Powell said. “Avoidable household and business insolvencies can weigh on growth for years to come.”