Yesterday, the Fed’s Reserve Chairman Jerome Powell gave his semi-annual monetary policy testimony to the House Financial Services Committee (he gave testimony to the Senate Banking Committee the day before). He warned about the ‘significant uncertainty’ about the pace of the US economic recovery with particular concerns surrounding small businesses, as well as those on lower incomes and insecure jobs. Powell said that whilst he believed there were indicators showing signs of improvement, there is a long way to go for the economy. Powell also stated the Fed will keep its ‘foot on the gas’ until it gets through the pandemic crisis.
In his statement Powell said: ‘The levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery’, adding, ‘Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely’. However, Powell did say he expects to see strong job creation through July.
Powell also reiterated his belief that the fragile recovery would be put at risk if Congress was to pull back on ongoing support. ‘I would think that it would be a concern if Congress were to pull back from the support that it’s providing too quickly’, he said in the Q&A session after his testimony, adding, ‘I do think it would be appropriate to think about continuing support for people who are newly out of work and for smaller businesses who are struggling. The economy is just now beginning to recover. It’s a critical phase and I think that support would be well-placed at this time’.