Virus takes econ forecasting challenge to ‘ whole new level,’ Powell says
WASHINGTON — Efforts to forecast the U. S. economy’s path to recovery from the current deep downturn face “a whole new level of uncertainty,” Federal Reserve Chairman Jerome Powell said Thursday.
Not only is there the difficulty predicting how the pandemic will play out, it is also unclear how American workers and consumers will react as lockdowns aimed at limiting the spread of the virus are lifted, Powell said in an address to a virtual Fed conference.
Successfully restarting the economy will depend in large part on the public’s confidence that the loosening of the stay- at- home orders will not trigger a resurgence of the virus, he said.
“The pain of this downturn is compounded by the upending of normal life, along with great uncertainty about the future,” he said. “All of us have our own decisions to make . . . and those decisions will depend on public confidence that it is again safe to undertake various activities.”
The Fed has cut its benchmark interest rate to a record low of zero to 0.25%, purchased $ 2 trillion of Treasury and mortgage- backed securities and launched a number of programs aimed at keeping the financial markets functioning.
Powell did not send any signals in his remarks about what the Fed might do next but Fed Vice Chairman Richard Clarida, speaking at a different event, repeated the Fed’s pledge to use all of its tools to protect the economy and promote a strong rebound.
“The Federal Reserve will continue to act forcefully, proactively and aggressively as we deploy our toolkit . . . to provide critical support to the economy during this challenging time,” said Clarida, who spoke by webcast to the New York Association for Business Economics.
Powell and Fed board member Lael Brainard spoke at the 15th “Fed Listens” event, which the central bank began holding last year in an effort to gather public input into possible changes the central bank should make in the way it conducts interest- rate policies. The Fed still hopes to release its findings later this year.
Pat Dujakovich, president of the Greater Kansas City AFL- CIO, told the Fed officials that his concern is that many workers, especially those who had just gained jobs as unemployment fell to a 50- year low before the virus struck, could lose hope of ever getting back into the labor force.
Powell said it is “tragic” and “heartbreaking” to see unemployment surging now after it had been so low at the start of the year.
“This is a hard, hard blow,” Powell said. But he said it is important to remember that the economy will recover and disadvantaged communities “will always have our support.”