Federal Reserve Chairman Jerome Powell said on Thursday that he believed the economy could turn back once the coronavirus pandemic subsides and the Americans resume work.
“There is every reason to believe that the economic rebound, when it occurs, can be robust,” said Powell, in a webcast address to the Brookings Institution.
Fed staff feared a meaningful recovery would not begin until 2021, according to the minutes of the Fed’s March policy meeting published on Wednesday, but the Fed chairman appeared more optimistic on Thursday, saying that most people think a recovery will start later this year.
Read: Worst scenario for Fed staff: no recovery until next year
In the past month, the Fed has cut its benchmark interest rate to near zero, started buying US treasury bills and mortgage debt, and started putting together a dizzying array of lending programs. to keep every corner of the financial markets in business.
Powell said the programs in place are working and that “market conditions have generally improved.”
Earlier Thursday, the Fed took additional steps to provide $ 2.3 trillion in loans to support the economy, including a Main Street loan program for midsize businesses and support for states and cities. .
Lily: The Fed announces new loan plans to support the economy
Powell said the programs would help bridge the brink of the coronavirus era to “a position of renewed economic strength on the other side.” The high unemployment rate will be temporary, he added.
Economists note that the Fed cannot prevent the economy from slowing sharply as the economy shuts down to prevent the spread of the virus.
Initial claims for state unemployment insurance climbed again this week, as layoffs have risen to nearly 17 million since mid-March. Economists expect GDP growth to contract sharply in the April-June quarter.
But the Fed’s programs are designed to mitigate the damage to households, businesses and the financial markets.
Powell pointed out that the Fed uses lending powers, not to send grants to recipients. Many Americans will need direct injections of funds, so there is a “great need” for Congressional budget spending. He said that more support was needed and that it would be a good idea.
Democrats and Republicans are deadlocked on the next aid package.
“We will continue to use these powers forcefully, proactively and aggressively until we are confident that we are firmly on the road to recovery,” said the Fed President.
The Fed chairman stressed that the central bank would not be in a hurry to cut and end its lending programs.
“The thing we will be looking for is to make sure that the economy is really on a solid footing before we start to fall back,” he said.
Powell avoided when asked about the suggestion of US Treasury Secretary Steven Mnuchin that the economy could open by the end of May, saying he would leave it to experts at health.
However, he stressed that it was important to have a “national plan” on how Americans would return to work, saying it was important to avoid any “false starts”.
If this is done, there is “every reason to believe that we can get back on the road to recovery soon enough,” he said.
US stock indices opened higher on Thursday with the Dow Jones Industrial Average
more than 300 points at the end of the morning.