Federal Reserve Chairman Jay Powell has warned that the US economy may not “fully recover” until it has a vaccine for Covid-19, and perhaps not before the end of 2021.
“Assuming there is no second wave of coronavirus, I think you will see the economy recover steadily in the second half of this year,” Powell told CBS News in a broadcast interview. Sunday. “So for the economy to fully recover, people will need to have full confidence. And that may have to wait until a vaccine arrives. “
Powell said the economy would eventually recover, but “it may take a while. . . that could go on until the end of next year, we really don’t know. “
President Donald Trump said last week that he hoped to have a coronavirus vaccine in production by the end of the year. But public health experts, including Anthony Fauci, head of the US National Institute of Allergies and Infectious Diseases, and Rick Bright, recently ousted head of the US Biomedical Advanced Research and Development Authority, warned that the process was likely to go ahead. take more time.
Dr. Fauci, a prominent member of Mr. Trump’s coronavirus task force, said he expects the search for a vaccine to last at least a year to 18 months. Bright told Congress last week that he thought Dr. Fauci was too optimistic.
Powell said last week that “additional policy action” may be needed from the Fed and tax officials to avoid further long-term damage to the US economy.
Measures to combat the Fed crisis, including cuts in base interest rates to near zero and a series of special programs to provide liquidity, have resulted in a sharp rebound in financial markets from lows the end of March.
But the economic data remains bleak. Unemployment in the United States hit a post-war high of 14.7% in April, with more than 36 million Americans claiming unemployment benefits since the spread of the coronavirus pandemic to the greatest world economy.
The US Congress has already approved nearly $ 3 billion in relief to help struggling businesses and individuals, but there is a growing consensus in Washington that more fiscal stimulus will be needed – even if Democrats and Republicans are divided on how to distribute federal funds.
Late Friday, the Democrat-controlled House of Representatives adopted Nancy Pelosi’s plan for $ 3 billion in new stimulus spending.
But Mitch McConnell, the main Republican in the Senate, rejected the proposed “Heroes Act,” a 1,815-page bill that includes $ 500 billion for state governments and $ 375 billion for local authorities fighting for balance the increase in costs with the drop in tax revenues triggered by the pandemic. Republicans are writing their own proposals, including a “liability shield” for businesses to avoid litigation from workers getting coronavirus at work.
Trump has repeatedly asked that the next stimulus include a reduction in payroll taxes – deductions for rights such as social security and health insurance. Larry Kudlow, the White House’s top economic adviser, last week suggested that lower corporate taxes and more flexible business regulation should be part of any future relief package.
The Trump administration has taken a more optimistic stance on the US economy than Mr. Powell, with White House officials repeatedly insisting that the economy should rebound before the end of the year.
Meanwhile, Trump’s allies say the president, who is seeking re-election this year, is preparing to base his campaign on the argument that he is better qualified than the presumed democratic candidate Joe Biden to rebuild the country. ‘economy.
The president has relied on state governors to reopen businesses and lift lockdown restrictions in recent days, even as experts, including Dr. Fauci, warned that a preventive reopening could cause “suffering and dead ”.
Last weekend, Peter Navarro, a senior trade advisor to Mr. Trump, said the continuing blockages “would kill more people than the virus” because hospitals do not screen for cancer or perform other procedures. not related to the coronavirus.
“If you contrast like this complete lockdown where some people in the medical community just want to run and hide until the virus is gone, it will not only take a heavy toll on the US economy, but it will kill a lot more people than the virus, the China virus would, “Navarro told NBC News.