Full Transcript: 60-minute interview with Fed President Jerome Powell on economic recovery from the coronavirus pandemic


Editor’s note: On May 13, 2020, the 60-minute correspondent, Scott Pelley, interviewed Federal Reserve President Jerome Powell in the boardroom at Federal Reserve headquarters in Washington, DC. Here is the transcript of this interview. Scott Pelley’s interview with Mr. Powell was broadcast on Sunday, May 17, 2020, at 60 minutes.

SCOTT PELLEY, CBS NEWS / 60 MINUTES: There is only one question that someone wants an answer to, and that is: when does the economy recover?

JEROME POWELL, PRESIDENT OF THE FEDERAL RESERVE: This is a good question. And very difficult to answer because it really depends, to a large extent, on what is going on with the coronavirus. The sooner we get the virus under control, the faster businesses can reopen. More importantly, people will sooner be convinced that they can resume certain types of activities. Going out, eating out, traveling, flying, that sort of thing. So that will really tell us when the economy can recover.

PELLEY: Many states are starting to reopen their economies. Do you think the virus is under control?

POWELL: Well, I think we’ll find out what’s going on with this. People will have to take certain measures to protect themselves. Wash your hands, wear masks in certain situations and things like that. And I think over the next few months you will see the beginnings of the recovery, as people, that businesses will reopen and people will go back to work.

The big thing that we must avoid during this time is a second wave of viruses. But if we do, then the economy can continue to recover. We will see GDP recover after the very low figures for this quarter. We will see unemployment fall. But I think it’s going to take a while before we feel really well recovered.

PELLEY: Well, that’s the question everyone wants an answer to: “What is a certain time? »Can there be a reasonably effective recovery without a vaccine?

POWELL: Well, I think you’ll see, again assuming there isn’t a second wave of coronavirus, I think you’ll see the economy recover steadily in the second half of this year. I think people will be careful to resume their typical spending behavior. As a result, parts of the economy will recover much more slowly.

Travel, entertainment, the things that we do that involve being with a lot of other people.
So for the economy to recover fully, people will need to be fully confident. And that may have to wait until a vaccine arrives. But in any case, the economy can continue to improve fairly quickly.

PELLEY: And your people tell you how millions of doses of a reasonably effective vaccine are how far away?

POWELL: So my people are not an expert on this. We don’t have virologists working here at the Fed. So we really depend on what the external experts say. And they will tell you that it is very uncertain. The timing of vaccine development is uncertain. We certainly hope it will be as soon as possible.

PELLEY: But there are minimums? I mean, a year, 18 months, that’s what the best experts say, hopefully. And so my question is: when the recovery accelerates, is it in a year or 18 months?

POWELL: You know, it depends on how people adapt to it. I think some parts of the economy will have a really hard time getting really busy. The parts that involve very close – people being in the same place, very close to each other. These sectors of the economy will be tested until people feel truly safe again.

PELLEY: Sporting events, theaters?

POWELL: I think it would be very difficult.

PELLEY: Airlines?

Gaerner: they will look for alternative things. Sports events and theaters will do more online performance and things like that. But it will be quite difficult for them. Much of the rest of the economy, however, can move forward. But we cannot fully recover because these other parts of the economy are important. However, we cannot fully recover until people are sure they are safe.

PELLEY: What economic reality must the American people prepare for?

POWELL: Well, I would take a more optimistic cut to that, if I could, and that is: it is a time of great suffering and difficulty. And it happened to us so quickly and with such force, that you really can’t put into words the pain people feel and the uncertainty they realize. And it’s going to take a while for us to come back.

But I would just say this. In the long term, and even in the medium term, you wouldn’t want to bet against the US economy. This economy will recover. And that means people will go back to work. Unemployment will come back down. We will pass through. This may take some time. This may take some time. It could extend until the end of next year. We really don’t know. We hope it will be shorter than that, but no one really knows. What we can do is the part we can control – be careful when companies get back to work. And each of us, individually and as a group, you know, take the steps that will protect us and each other from the spread of the virus.

PELLEY: As this period gets longer, what is starting to happen to the economy?

POWELL: There is a real risk that if people are out of work for long periods of time, their skills will atrophy a bit and lose contact with the workforce. This is something that shows up in the data – that longer and deeper recessions tend to leave damage to people’s careers. And that weighs on the economy in the future.

You could say the same thing about companies. The small and medium businesses that are so important to this country, if they have to go through a wave of avoidable insolvency, you have lost something that is more than a few businesses.
You know, this is really the machine for creating jobs. And if that happens, it will take a while to recover.

I think the good news is that we have policies that can help to some extent in minimizing these effects. And it’s keeping people and businesses out of insolvency for maybe three or six more months while health officials do what they can. We can save time with this. And so I think this type of support may be appropriate.

PELLEY: Some of the best economic analysts in the world report to you. And I wonder what they will tell you about the height of unemployment.

Gaerner: Again, no one knows. I would say this, however. It seems reasonable to think that there will likely be more layoffs this month and next month. And while we are sitting here, 20 million people have lost their jobs in the space of two months. And it’s heartbreaking because where we were only two months ago, we had the lowest unemployment rate in 50 years, the lowest African American unemployment rate since we started measuring it.

We had low and modest income communities telling us it was the best job market, that you can finally see the benefits of what a tight job market means. More opportunities. And it seemed like we would continue to see this go forward for a while and more and more benefits.

Instead, we have this situation where 20 million people have lost their jobs. And I think it’s likely we’ll have a few more months of net job loss. Then, assuming the economy starts to reopen and we do it successfully, you will see people going back to work.

The good news is that the 20 million people who have been overwhelmingly dismissed declare themselves to have been temporarily dismissed. They are considered temporary unemployed. And that’s because they expect to return to their old jobs.

So if these companies can reopen and if we can do it in a way that doesn’t create other problems with the virus, people can go back to work. So I would say that the peak of unemployment could be in the coming months. And then you might see it go down in the second half.

PELLEY: And what do your people project, 20%? 25%?

POWELL: I think there is a range of perspectives. But these numbers seem roughly correct for what the peak may be.

PELLEY: 25% is the estimated height of unemployment during the Great Depression. Do you think history will go back to that time and call it the second great depression?

Gaerner: no, I don’t know. I don’t think this is a likely outcome at all. There are very basic differences. The first is that the cause here – we had a very healthy economy two months ago. And it’s an outside event, it’s a natural disaster, indeed. And that’s a big difference. In the 1920s, when the Depression, well, when the crash happened and all that, the financial system really failed. Here our financial system is strong and has been able to withstand that. And we spent ten years strengthening it after the last crisis. So that’s a big difference. Also, the last thing I will say is that in the government’s response in the 1930s, central banks were trying to raise interest rates to keep us on the gold standard around the world. Exactly the opposite of what had to be done.

In this case, governments around the world and central banks around the world react strongly and very quickly. And stay there. So I think all of these things indicate what will be – it will be a very marked slowdown. This slowdown should be much shorter than the one you would associate with the 1930s.

PELLEY: People talked about a V-shaped recovery, the deep recession, and then the skyrocketing to where we were. How likely is that?

Gaerner: Yes, there are letters. People are fascinated by the possibility of different letters. And it is, again, very difficult to say because it depends so much on the path of the virus. I would say it is a reasonable assumption that the economy will start to recover in the second half, that unemployment will fall, that economic activity will resume.

We hear – my colleagues and I have spoken to a wide range of leaders across the country in recent weeks. These are not-for-profit organizations, educational institutions, medical institutions and businesses of all sizes. Union leaders and across the spectrum of American life. And I would say there is a growing feeling that the recovery may take a while to gain momentum. And that would mean that we would start our recovery and go down that road, and that would be good, but it would take time to pick up speed.

PELLEY: I was talking to a former Federal Reserve official who said, “V-shaped recovery on the table. There is no chance. “

POWELL: Well, I would say the bottom line is to get back on the road to recovery. And I think it can happen quite quickly. This should happen in the second half. It is a reasonable expectation. After that, the path will depend on a series of things. And yes, as I mentioned, I think it is very plausible that the economy will take some time to gain momentum. And that would imply that at least initially the recovery would take time to move, to gain momentum. And then would move at a faster rate later. But it is a reasonable and plausible expectation.

PELLEY: How much do you expect the economy to contract in the second quarter?

POWELL: The level of economic activity will therefore drop significantly in the second quarter. It will be reported at an annual rate, which will be essentially four times the amount it decreased during this quarter. But it’s going to be a big drop anyway. And, truly, unprecedented. And let’s remember though that it’s something that we do as a society, really, to protect ourselves from the virus. It’s not because there was an inherent problem, a housing bubble or something like that or the troubled financial system. Nothing like.

The economy was doing well. The financial system was fine. We do this to protect ourselves from the virus. And that means that when we do that, when the virus epidemic is behind us, the economy should be able to recover considerably. And I expect it to recover considerably, but it will take time.

PELLEY: But the contraction of GDP in the second quarter, what figures are you looking at?

POWELL: You know, the numbers are going to be very high. And it’s hard to be precise. I would not guess. The public estimates that are available are reasonable. And, you know, they will be very, very high.

PELLEY: 20%?

Gaerner: easily. You know, could easily be in the twenties or thirties.

PELLEY: Do you expect the third quarter to grow? Not to be negative?

POWELL: I think that will be the key question; I expect growth in the second half. I think the recovery – so the third quarter begins in July. I think there is a good chance that there will be positive growth in the third quarter. And I think you can reasonably expect growth in the second half. I would say that we are not going to go back quickly to where we were. We will not be returning to where we were at the end of the year. It probably will not happen.

The bottom line is, once we start on the road to recovery, stay on this road and do everything we can to stay there for a long time. And the economy will heal continuously. And before we know it, we’ll be back to more normal levels of unemployment and activity. People will go back to work.

PELLEY: In terms of manpower, Mr. Chair, who is most affected by this slowdown?

POWELL: The people who suffer the most are the most recently hired and the lowest paid. They are women to an extraordinary extent. We are actually releasing a report tomorrow that shows that of those who worked in February and who earned less than $ 40,000 a year, almost 40% lost their jobs in the past month or so. Extraordinary statistics. So that’s who bears the brunt of it all.

PELLEY: The people who can afford it the least suffer the most?

Gaerner: that’s true. Now, I think the pain is very widespread. But it is clear that it is the heaviest for those who are least able to bear it.

PELLEY: In terms of stimulus, has Congress done enough?

POWELL: Congress did a lot and did it very quickly. There is no precedent in American post-World War II history that is even close to what Congress did. They have exceeded $ 3 trillion in stimulus, which represents 14% of GDP. It is much bigger than anything they have done. And also very, very fast. So much of this money is just starting to flow into the economy. And that will help households and businesses in the coming months. The fact is that the coronavirus shock is also the biggest shock the economy has had in living memory.

And the question is, will it be enough? And I don’t think we know the answer to that. The Fed may well have to do more. Congress may need to do more. And the reason we need to do more is to avoid long-term damage to the economy.
If we leave people out of work for long periods of time, if we let businesses fail needlessly, waves of them will have longer-term damage to the economy. The recovery will be slower. The good news is that we can avoid this by providing more support now.

PELLEY: And what kind of support, in your opinion, do you think Congress would like to consider?

POWELL: You know, I don’t give them any advice. We have no control over Congress. Quite the contrary, in fact. We are a creature of Congress. And they are watching us. But – so I don’t give them advice on particular policies. But I would say, if I may, that policies that help businesses avoid avoidable insolvency and that do the same for individuals – keep workers at home, force them to pay their bills. Keep the families solvent so that when that happens we go out on the other side, we are able to have a strong recovery. People will be able to spend, be able to do things. And that’s what we need, to have a strong recovery when it comes.

PELLEY: The expansion of unemployment benefits will end soon. I guess this is the kind of thing you would like to see extended?

POWELL: I think the enhancement to unemployment insurance, which again is unprecedented in American history, is a very large program. I think it will end in late July. And that, I think is something that Congress will be looking at – whether it should be extended in one form or another.

PELLEY: In March, as the Dow Jones Industrials lost 8,000 points and investors shunned US Treasuries, considered the safest investment possible, what did you think at the time?

POWELL: Well, it was an extraordinary event. What the markets were trying to do, they were trying to deal with something that you really can’t know, and that’s what will be the effect of the virus, which by then – it was clear that it would be a global virus . It was the moment of truth, that is when in Korea, Italy and Iran at the same time, you saw great epidemics. And then it was clear that the virus was not going to be successfully contained in China. And immediately after that, there was a theft to safety. Investors therefore wanted to be in very short term instruments and they wanted to be in the main currencies. And so they buy treasury bills, for example. They did not even want to buy Treasury bills in the longer term because they could change in value. So it was an extraordinary moment. And obviously we had to do something, and we did it. We put our tools to work to really support the function of the market, to bring the markets back to where they would work. And they did. It took us a while, but it worked.

PELLEY: But I’m curious about this moment for you personally. When you were sitting in your office by that door over there and looking at your Bloomberg terminal and the world was breaking up, what did you say to Jay Powell?

POWELL: Well, what was I thinking? You know it didn’t happen. It was not a switch that was activated. So we saw it coming. And we thought about what we were going to do. So the thing about the Fed is – the Fed is an institution, it is a large American institution. And it is full of very competent people, many of whom are now in leadership positions, who were here during the financial crisis. So these people saw what happened during the last serious crisis. And they were there to help you.

So we got together and thought about things to do. And we did it 24 hours a day for about four weeks – just putting old programs into play, inventing new programs, intervening in various markets, just to make sure the markets worked.

We are not trying to move the markets to a particular level. We just want them to work. We want, you know, people to buy and sell. And so, you know, it felt like we really needed to act. And we did it.

PELLEY: Is it fair to say that you just flooded the money system?

Gaerner: yes. We were doing. This is another way of thinking about it. We were doing.

PELLEY: Where did it come from? You just print it?

Gaerner: we print it digitally. So, as a central bank, we have the ability to create money digitally. And we do that by buying treasury bills or bonds for other government guaranteed securities. And it actually increases the money supply. We also print real money and distribute it through Federal Reserve banks.

PELLEY: In terms of size, Mr. Chair, how does the Fed’s actions compare to the unprecedented measures taken in 2008?

POWELL: So the things we do now are much more important. The asset purchases we make are a multiple of the programs that were carried out during the last crisis. And it’s very different this time. During the last crisis, the problems were related to the financial system. They therefore provided support to the banking system. Here, really, the problems lie in what we call the real economy, the companies that manufacture and sell goods and services. And what happens to them is that many of them are closed or simply have no income.

And we’re trying to do what we can to get them through this period where these are very good companies that were, you know, in good financial condition last February, but now they have no business. And they have fixed costs. So we are trying to help them get through this period.

PELLEY: Are you now convinced that the markets, the stock markets, the bond markets are working properly?

POWELL: They were. The markets are working well. Let me give you, as an example – a period of the crisis of the first half of March, when the big American companies, the big names, could not borrow. And companies tend to renew their debt and borrow perfectly routinely in today’s financial markets and economy.

And so we said we were going to start a business loan facility. We also have a facility for medium and small businesses. But it’s for big companies. So when we said that and started building it – and what happened was that the markets started to heal.

And the mere fact that we have declared our firm intention to make credit available has really calmed things down. And now companies have had a month and a half to finance themselves. And many have done it without our help. So it’s a good thing.

PELLEY: Now all they need is business?

Gaerner: yes. But in the meantime, they were able to borrow. They have a lot of cash. And that will make their lives easier during this time when business is going to be weak.

PELLEY: Are the banks healthy?

POWELL: So after the last financial crisis, banks have more than doubled their capital and liquidity, and they are much more aware and better able to manage the risks they take. They are so much stronger than before the financial crisis, the last financial crisis. In fact, they were at the heart of it. They were a key mechanism to amplify the bad things that happened. This is no longer the case now. They were strong. They did everything you hope they would do. Companies have cut their lines of credit. They funded them. There is – much more liquidity has flowed into the banking system as people have sold risky assets. And the banks have absorbed it all. So the banks have been strong so far.

PELLEY: And for people wondering if they should take their money out of the bank and put it in a mattress, what do you tell them?

Gaerner: this is not necessary. No need at all. Banks have been strong, they are doing well. There is absolutely no need to do that.

PELLEY: Aren’t there any worries over there?

Gaerner: no

PELLEY: Mr. Chair, I have traveled the past eight weeks to talk to people who have lost their jobs, entrepreneurs who have lost their dreams and their businesses. They are now making choices between rent and food. And I wonder what your message is for them.

Gaerner: Yeah. So it’s a very difficult time in our country. People get sick. Their relatives fall ill. My relatives. And people who have built businesses in their lifetime see incomes fall to zero or, in any case, much lower. It’s just a terribly difficult time that we’re going through as a nation. And I don’t mean anything to minimize this. You know, we understand that. And, you know, we are committed to using our tools to support, provide relief and stability now and support the recovery.

So, but more to your question, I will say this. If we keep doing the right things in government, we keep providing support to businesses and households and the unemployed, if we do and if we think and pay attention to how we reopen the economy so that people take these social distancing steps to go ahead and try to do what we cannot have another epidemic – if we do all of these things, then the recovery can begin fairly quickly. And it can be robust. It will probably take some time to gain momentum, but we can enter a recovery. And that’s the main thing, to get into a recovery and then do the things we need to do to keep it going and get people back to work.

And I think this process can evolve quite quickly in economic time. It may seem like a long time, but we can really get back to a much better place fairly quickly. And for the most part, it inspires members of government to do what we can to support households and businesses in these difficult times.

PELLEY: What we see is that the federal government is borrowing thousands of billions of dollars to try to get us out of this hole. How long can it last?

POWELL: Well, if you take a longer perspective, the United States is spending more than it has been spending in a while. And this is something that we are going to have to deal with. The time to deal with this, the time to commit to a sustainable fiscal trajectory, which really means that the economy is growing faster than the debt, and that means you have to control the growth of the debt – the time of it is when the economy is strong. When unemployment is low, when economic activity is high, that’s when you deal with this problem. Now is not the time to prioritize this concern.

The United States is the global reserve currency. The dollar is the world’s reserve currency. And we can borrow at low rates. We have the capacity to repay this debt. And I would say this is the time when we can use this force to our long-term advantage. It is true that the deficits will be large for a few years here. And that we will have to face it. But the time has come to deal with this recovery.

Again, this is a different and bigger economic shock than any other in our lives. But this is not from within the economy. It comes from outside the economy. And so that doesn’t say anything bad about our economy. We can get back to a healthy economy fairly quickly. And the spending we do to support people and businesses will help us do it.

PELLEY: What are the consequences of not borrowing enough, of not spending enough?

POWELL: So the risk is that there may be longer-term damage to the productive capacity of the economy and to people’s lives. And I’ll give you an example. Si les travailleurs sont sans emploi pendant une longue période de temps, il leur devient plus difficile de réintégrer le marché du travail. Leurs contacts deviennent vieux et froids, leurs compétences peuvent s’atrophier et ils perdent juste leur réseau relationnel. Et il peut être difficile de retourner au travail. Et plus vous êtes au chômage, plus c’est un facteur. Vous voulez donc éviter cela.

Vous voulez que le chômage soit relativement court et si les gens peuvent reprendre leur même emploi, c’est super. Et beaucoup de cela peut se produire ici. La même chose est vraie avec les entreprises. À des moments où il y a des niveaux élevés de défaillances d’entreprises, même de très bonnes entreprises qui échouent à cause de quelque chose comme ça, qui peuvent nuire plus longtemps à l’économie et rendre la reprise plus lente et plus faible.

Cela peut peser sur l’économie pendant des années. Nous avons donc des outils pour essayer de minimiser les dommages à long terme du côté de l’offre de l’économie. Et ces outils impliquent simplement de garder les gens solvables, de les garder chez eux, de les faire payer leurs factures pendant peut-être quelques mois de plus.

Et la même chose avec les entreprises. Les éloigner du chapitre 11 si c’est évitable. Cela ne sera pas évitable dans de nombreux cas. Mais si c’est évitable, plus nous pouvons en faire, plus la reprise sera forte. Moins cette période pèsera sur la croissance économique à l’avenir.

PELLEY: Quel est le danger pour les budgets des États et des gouvernements locaux?

POWELL: Les gouvernements des États et locaux voient leurs recettes fiscales et leurs redevances beaucoup plus faibles. Beaucoup d’entre eux perçoivent des frais sur des choses comme les frais de transit, qui ont à voir avec les aéroports et les transports en commun, etc. Ils voient donc une forte baisse de leurs revenus.

Il y a là beaucoup de pression budgétaire. Et les gouvernements étatiques et locaux fournissent de nombreux services essentiels sur lesquels les gens comptent. Sécurité – sécurité publique, incendie, police, des choses comme ça. C’est donc une période difficile dans les gouvernements étatiques et locaux. C’est donc l’une des raisons pour lesquelles nous avons créé une facilité pour leur prêter de l’argent, pour les aider à traverser cette période de faibles revenus.

PELLEY: Je sais que vous n’aimez pas donner des conseils au Congrès, mais croyez-vous que c’est un domaine où le Congrès pourrait fournir de l’argent à l’État et aux gouvernements locaux pour les maintenir à flot?

POWELL: Je sais que c’est un domaine qui fait partie des discussions qu’ils ont. Le fait est que les gouvernements étatiques et locaux doivent équilibrer leur budget, les États le font. Et s’ils ne peuvent pas faire cela, ce qu’ils feront, c’est qu’ils licencieront des gens et qu’ils réduiront les services. Et ce n’est pas idéal à un moment où vous rencontrez toujours des besoins médicaux accrus et des choses comme ça. Voilà donc quelque chose qui mérite un examen attentif.

PELLEY: Au début de la crise dans cette salle du conseil, vous et le comité avez abaissé les taux d’intérêt essentiellement à zéro. Pourriez-vous les abaisser davantage en territoire négatif, ce que le président a suggéré comme une bonne idée?

POWELL: Donc, autour de cette table lors de la dernière crise et lors de la reprise, nous avons regardé les taux d’intérêt négatifs. Et c’est quelque chose que nous avons décidé de ne pas faire. Nous avons plutôt utilisé d’autres outils. Et ces outils impliquaient des indications prospectives sur le taux des fonds fédéraux et également de nombreux achats d’actifs ou un assouplissement quantitatif, comme il est souvent mentionné.

Je continue de penser, et mes collègues du Federal Open Market Committee continuent de penser que les taux d’intérêt négatifs ne sont probablement pas une politique appropriée ou utile pour nous ici aux États-Unis.

PELLEY: Et pourquoi pas? Le président semble penser que cela aiderait.

POWELL: Les preuves de son utilité sont assez mitigées. Et le problème est que les gens déposeraient de l’argent à la banque et que cet argent diminuerait. Ils paieraient des intérêts pour mettre leur argent à la banque. Ce n’est donc pas une politique particulièrement populaire, comme vous pouvez l’imaginer.

Mais en plus, cela peut aussi avoir tendance à faire baisser la rentabilité des banques, ce qui les rend susceptibles de prêter moins, ce qui pèse sur la croissance économique. Je dirais donc simplement que ce n’est pas du tout établi, vous savez, dans l’analyse économique que les taux négatifs ajoutent vraiment beaucoup de valeur.

PELLEY: Je pense que l’idée de taux d’intérêt négatifs est quelque chose que beaucoup de gens ont du mal à trouver la tête. Pourriez-vous me l’expliquer?

POWELL: Eh bien, plutôt que de payer des intérêts sur votre argent, vous payez des intérêts à la banque – ou si vous empruntez de l’argent, ils vous paient pour emprunter de l’argent. Et si vous leur prêtez de l’argent en le déposant dans une banque, ils vous paient de l’argent.

PELLEY: Donc, les banques paieraient des gens pour emprunter de l’argent, essentiellement?

Gaerner: oui.

PELLEY: Et cela provoquerait probablement plus d’affaires et de commerce?

Gaerner: Oui. Mais, vous savez, cela a été essayé. We have negative policy rates in many countries around the world as a result of the financial crisis. And there’s no clear finding that it actually does support economic activity on net. And it introduces distortions into the financial system, which I think offset that.

There’re plenty of people who think negative interest rates are a good policy. But we don’t really think so at the Federal Reserve. And I think it’s an area of real uncertainty in the central banking world.

PELLEY: Health experts are telling us that, as various states begin to reopen their economies, there will inevitably be increased infection and excess deaths. And I wonder if any calculations have been made about how many excess deaths are acceptable to get the economy moving again.

POWELL: So that is a question that is not for the Federal Reserve. Researchers are doing that research and they’re publishing it right now. We have a very important mission. But we really are not the ones to decide when the economy should reopen. That has to be done, really, by elected officials in consultation with experts.

PELLEY: If the economy reopens and the infection rate surges, what then?

POWELL: Well, the risk would be that you would have to reintroduce, the government would have to reintroduce, the social distancing measures. And that you would have another downturn. And that would be bad for confidence. So that’s a risk we really want to avoid. And I think we can avoid.

It comes down to people needing to be careful about their behavior because, you know, the virus hasn’t gone away. It’s still out there. And if — the reason that cases have gone down and are declining is because people have been in their homes and not in their businesses and not out among crowds– if we start, if we go back without observing the right protective measures, then it’s possible, the experts say, that we would have a second wave. And that would be very damaging to have to reintroduce the measures and slow the economy down again. That would be quite damaging to the economy and also to public confidence.

PELLEY: How important, in your view, is it to avoid that?

POWELL: It’s very important to avoid that. Very important.

PELLEY: Do you fear that some places are opening up too quickly?

POWELL: You know, it’s just not– it’s not an area where we’re supposed to be. We’re not the experts on that. We really have to leave that to, have some faith in our public institutions and the thing is, we’re having a public debate about that now.

And we have a big country and people are doing different things. My sense, from talking to business and nonprofit leaders, is that it’s not a binary thing. I think wisely, many companies and people are taking a much more nuanced approach.

They’re thinking about their business model, the place where they live. They’re thinking about the kind of safeguards that would be appropriate in their workplace. And making sure that people take them. And also what’s the right timing. I think people will tend, where their safety is concerned and where people understand that their safety’s concerned, I hope, they’ll take smart measures to control the risks.

PELLEY: The United States leads the world in illness and death in the pandemic. Does that suggest that the United States should be the last country to reopen?

POWELL: Again, we don’t have responsibility for the question of when the United States should reopen. That’s really a question for other parts of the federal, state, and local governments. And also really importantly, it’s a question for people in how they want to live their lives.

The government can decide that social distancing measures are no longer required, that nonessential businesses can reopen. But individuals, families are going to decide whether they want to go shopping again, and if so, when and where. And so I think that’s really the thing.

And that’ll depend on confidence. When the public is confident that it’s safe to go out, they’ll go out. And I think that’s the key thing, that’s why there’s no trade-off here. I think the key thing is to get the virus under control and also have people understand that more social distancing measures really goes with opening up the economy. The more things you do to protect yourself, the sooner we can open up the economy. And the safer it will be to do so.

PELLEY: Has the Fed done all it can do?

POWELL: Well, there’s a lot more we can do. We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have. So there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.

PELLEY: What would the Fed’s next steps be, potentially?

POWELL: Well, to begin, the one thing we can certainly do is we can enlarge our existing lending programs. We can start new lending programs if need be. We can do that. There are things we can do in monetary policy. There are a number of dimensions where we can move to make policy even more accommodative. Through forward guidance, we can change our asset purchase strategy. There are just a lot of things that we can do.

PELLEY: What is the best guarantee that you can make to the American people?

POWELL: Well, a lot of things I can’t guarantee. The one thing I can absolutely guarantee is that the Federal Reserve will be doing everything we can to support the people we serve. And that means providing some relief and stability now. It means supporting the recovery when it comes. And it means doing everything we can to avoid longer term damage to the economy, and longer-term damage to people’s careers and to the many great businesses that make up our economy.

PELLEY: What gives you hope in this dark time?

POWELL: Well, as I mentioned, in the long run, I would say I would never bet against the American economy or the American people. We have a great economy. We have highly industrious people. We have the most dynamic economy in the world. And we’re the home of so much of the great technology in the world.

So in the long run, I would say the U.S. economy will recover. We’ll get back to the place we were in February; we’ll get to an even better place than that. I’m highly confident of that. And it won’t take that long to get there. It will take some time to get there. So I think we’re going to need to help each other through this. And we will.

PELLEY: Mr. Chairman, I just got a push notification on my phone: « Dow tanks more than 500 points in Wall Street sell-off after Fed chair warns economic recovery will be prolonged and bumpy. » You knew that was coming.

POWELL: I’ve been watching the markets.

PELLEY: And when you say things, people listen. And Wall Street didn’t want to hear that this was going to take longer than their hopes indicated?

POWELL: I was really calling out a risk that I think is an important one for people to be cognizant of, and that is the risk of longer-run damage to the economy. And really, the good news is that we have the tools to limit that longer-run damage by continuing to provide support to households and businesses as we get through this. And that was really my message.

PELLEY: It was meant to be a signal to Capitol Hill to tell lawmakers the economy needs a great deal more support?

POWELL: That was a part of my remarks this morning. I also wanted to just talk more at length about the longer-run dangers and commit the Fed to really stay in this fight as long as we need to as well.

PELLEY: In this emergency, the Fed has been lending to large companies. I wonder, when will small businesses, the corner grocery store owned by a mom and a pop and a family for years, when are they going to see help?

POWELL: There are lending programs for small, medium, and large companies. For the small companies, you have the Paycheck Protection Program which is being administered by the SBA. That’s available to companies that are under 500 employees. And these are loans that turn into grants, if you comply with the terms of the loan. And we’ve been through a large amount of funding for that, and that’s for small companies.

For the larger companies we have the corporate credit facilities for the secondary market and primary market, and that’s for companies that are big and have access to the bond market. And that’s worked very well. We haven’t actually had to lend anyone any money because now the markets are working because the markets know that we’re there.

In the middle, you have what we call the Main Street facility, and that’s for small and medium-sized businesses up to $5 billion in revenue and 15,000 employees. And we are putting together a facility that will lend money to companies that were in good financial shape before the pandemic hit, and we’ll do that in order to get them through this difficult period of when their revenues may be very low.

PELLEY: You are an enormous fan of the Washington Capitals. When do you think you’re going to be comfortable going back to a game?

POWELL:  That’s a great question. Soon, I hope. You know, certainly no sooner than next season. I think next season, we can think about– it’s going to depend on the path of the virus, which is very hard to say. I’ll say generally, public sporting events, public concerts and things like that — those will be among the last things that can be resumed.

PELLEY: As we discussed earlier in the interview, the pandemic has illuminated some of the disparities in our economy. And I wonder what you would like to see on the back end of this, when we begin to repair the damage?

POWELL: We, in the last couple of years, have seen real gains, before the pandemic. We’ve seen real gains for people at the lower end of the income spectrum. And it had been a function of having a tight labor market, the lowest unemployment in 50 years. And we were really starting to see wage gains at the low end. For the last couple of years of the expansion, wage gains were the highest for people at the low end of the wage spectrum. And it was a great thing to see. But we had to wait until the eighth, ninth, and tenth year of an expansion to get there. And I don’t think that’s a good long-term strategy.

You know, at the Fed, we will do everything we can to get the economy back in expansion mode, and to keep it there for a long period of time. I don’t want to think though that we’ll take years and years to get back to a place where we have a tight labor market, and that’s what it takes to really get opportunities to less advantaged communities, low- and moderate-income communities.

I think we do need to be mindful of finding a way to a more inclusive prosperity in this country. It’s not something the Fed can really lead on. But you actually hear businesses talking about this a lot because it’s their workforce, it’s the people that work for them.
They want people with skills who can benefit from the great opportunities in the global economy. But I do think that’s a very important thing. And at the Fed, we’re very mindful that we serve all of the people, including those in low- and moderate-income communities. And we spend a lot of time talking about what their lives are like, and how our policies affect them. Not just the numerical aggregates that economists like, but also how it affects real people’s lives. And, you know, I think that’s a very important part of our analysis.

PELLEY: Finally, what metrics are you looking at here hour by hour, day to day, to divine what the future is going to be?

POWELL: You know, at the moment, the thing that matters more than anything else is the medical metrics, frankly. It’s the spread of the virus. It’s all the things associated with that. Of course, we’re also looking at the employment data.

But in a sense, the real-time economic data that we’re seeing is just a function of how successful the social distancing measures are. So the data we’ll see for this quarter, which ends in June, will be very, very bad. There’ll be a, you know, big decline in economic activity, big increase in unemployment. But in a sense, those are a byproduct. So what we’re really looking at is getting the medical data, which is not what we usually look at, taken care of so that the economic data can start to recover. And that we think can happen as soon as the third quarter.

PELLEY: Do you have a direct connection to the CDC? Where does this information come to you from?

POWELL: You know, we don’t have people on staff here who have made their living doing that. But of course we’ve had lots and lots of contact with experts, both at the staff level and I’ve talked to a number of experts in the area on an ongoing basis. So we do check in with the real experts, and get their best thinking. But they will tell you that there’s a lot of uncertainty about this.

PELLEY: Thank you very much.

POWELL: Thank you.


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