National Post (National Edition)
Fed's Powell says path still 'uncertain'
COVID-19 MENACE
WASHINGTON • America's economy has shown “marked improvement” since the coronavirus pandemic drove it into recession, but the path ahead remains uncertain and the U.S. central bank will do more if needed, Federal Reserve Chair Jerome Powell told a congressional panel on Tuesday.
Noting the rebound in jobs and household spending since the economy cratered in the spring and early summer, Powell said it still remains far from where it was “and the path ahead continues to be highly uncertain ... A full recovery is likely to come only when people are confident it is safe to re-engage in a broad range of activities” with the coronavirus under control.
Until then, Fed officials “remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy,” Powell said in testimony to the House of Representatives Financial Services Committee.
The hearing, which included testimony from Treasury Secretary Steven Mnuchin, is the first of three this week at which the Fed chief will field questions on the central bank's response to the pandemic and its implementation of the Coronavirus Aid, Relief and Economic Security Act.
Mnuchin, in prepared remarks to the Democratic-controlled committee, said he felt the economy “will see tremendous third-quarter growth, fuelled by strong retail sales, housing starts and existing home sales, manufacturing growth, and increased business activity.” Still, a further “targeted package” of fiscal relief was needed, Mnuchin said.
Congress passed the US$2.3 trillion CARES Act aid package in late March as the foundation of the federal government's economic response to the pandemic. It authorized the Treasury to fund an array of Fed lending and credit programs.
Powell is likely to get an earful from lawmakers concerned that there has been limited use of programs designed to help small businesses even as other Fed actions have ignited a stock market rally that helped investors recoup earlier losses.
Meanwhile, joblessness remains elevated and roughly 29 million people are claiming some form of unemployment insurance on a week-to-week basis.
The state of the economy and the path of the pandemic are central issues in the Nov. 3 presidential election.
The pandemic dealt a death blow to the longest-ever U.S economic expansion when widespread business shutdowns and stay-athome orders triggered the largest drop in activity since at least the Second World War.
The Fed responded by cutting interest rates to near zero, ramping up bond purchases and launching nearly a dozen emergency credit facilities, several with Treasury's backing.
In all, Powell said, the Fed has “helped unlock” US$1 trillion of funding to keep businesses from shutting so that they can more easily rehire workers when the economy picks up. But not that much has actually been lent to firms. Far from it.
The Fed's US$600-billion Main Street Lending Program has so far lent or is in the process of lending US$2 billion to businesses that cannot otherwise obtain credit, Powell said. Critics say the Fed and Treasury should make it easier to borrow.
Congress is at an impasse on negotiations over additional support for outof-work Americans after a US$600-a-week federal supplement to jobless aid expired over the summer.
Powell has said that additional federal stimulus is likely to be needed, though top White House economic adviser Larry Kudlow says the recovery is “self-sustaining” without it.
Mnuchin and Powell were pressed by lawmakers concerned the multi-trillion-dollar effort to battle the economic fallout from the pandemic had left a broad swath of businesses vulnerable, from the smallest corner restaurants to commercial office properties and hotels.