U.S. Federal Reserve Chair Jerome Powell on Monday said the outlook for the world’s biggest economy is “extraordinarily uncertain” and will depend both on containing the coronavirus and on government efforts to support the recovery.
Economic activity has picked up in recent weeks after what in some places had been months of shutdowns to slow the spread of the novel coronavirus, Powell said in remarks prepared for a Congressional hearing on Tuesday.
“We have entered an important new phase and have done so sooner than expected,” Powell said. “While this bounceback in economic activity is welcome, it also presents new challenges —notably, the need to keep the virus in check.”
With output and employment still far below their pre-crisis levels, he said, “the path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” again saying that a full recovery is unlikely until people are confident it is safe to be out and about.
“The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed,” Powell said.
The Fed has cut rates to near-zero, bought trillions of dollars of bonds and rolled out nearly a dozen credit backstopping programs to boost the economy and steady markets. The Fed has also pledged that it will use the “full range of tools” to support the U.S. economy.
Congress has committed nearly $3 trillion in aid.
But more may be needed, Powell signaled, noting that the central bank’s as yet untapped Main Street lending facility may prove valuable “in the months ahead” for firms hit by a dramatic drop in economic activity during the pandemic.
Some states have begun to dial back their reopenings as coronavirus infections surge.