Fed’s Powell: Lack of Further Stimulus Imperils Recovery

By: - October 6, 2020

The U.S. economic recovery remains far from complete and could still slip into a downward spiral if the coronavirus is not effectively controlled and growth sustained, Federal Reserve Chair Jerome Powell warned on Tuesday in a call for more help to businesses and households.

“The expansion is still far from complete,” Powell said in remarks describing how even if the recovery simply slows too much it could lead to “tragic” outcomes for the less well-off, widening inequality, and a situation where “weakness feeds on weakness.”

In that situation, he said, officials should risk doing too much for those that need it rather than too little, an implicit call on members of Congress and the Trump administration to aim high in their still-stalemated deliberations over how much more to spend on aid for households and businesses.

Powell, who held earlier public policy jobs focused on reducing the federal deficit, said those concerns should now be set aside given the one-sided risks – more bad than good – facing the United States six months into its battle against the coronavirus pandemic and the economic fallout from it.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said in remarks delivered online to the National Association for Business Economics. “The risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed they will not go to waste. The recovery will be stronger and move faster.”

The comments mark a slight shift in Powell’s analysis of where the economy stands entering a critical phase in which the virus continues to spread while the economy divides between sectors and people doing well and those facing serious trouble. Where his earlier rhetoric focused on building a financial “bridge” to the post-pandemic era, he has now suggested that even a recovery that slips into too low a gear could devolve into a self-fulfilling recession.

“The economy is recovering, but even if we don’t have an immediate double-dip recession, if it’s just a very, very slow recovery, that itself could be problematic,” said Kathy Bostjancic, chief U.S. financial economist with Oxford Economics.

U.S. stocks fell after Powell’s comments. The dollar was little changed against a basket of currencies while Treasury prices were mixed.

WEAKNESS FEEDING ON WEAKNESS

Powell did not mention any further Fed programs that are being contemplated beyond the roughly dozen rolled out in the spring, many still largely untapped and putting potentially trillions of dollars at the disposal of firms and credit markets.

However members of Congress and the Trump administration are negotiating over further fiscal programs of perhaps $2 trillion or more, efforts that many at the Fed and elsewhere feel is vital at this stage in the U.S. recovery.

So far, Powell noted, the worst has been avoided, largely because of the quick action by officials last spring. Government loans to small business and enhanced unemployment benefits have “supported a strong but incomplete recovery in demand and have – for now – substantially muted the normal recessionary dynamics that occur in a downturn,” with fewer bankruptcies and fewer permanent layoffs than would have occurred otherwise, he said.

But despite some bright spots like a turn upward in business investment, Powell said the pace of improvement “has moderated,” with slower job growth and “notable” layoff announcements from large companies.

There is, he said, a “risk that the rapid initial gains from reopening may transition to a longer-than-expected slog back to full recovery.”

That sort of prolonged slowing, he warned could “trigger typical recessionary dynamics as weakness feeds on weakness.” 


© 2020 Thomson/Reuters. All rights reserved.

Source link

  • RSS WND

    • In 1 European city, foreigners responsible for 100% of serious sexual assault cases
      (REMIX) – The new crime statistics from the German city of Frankfurt contain shocking figures regarding foreigners and major crimes, including one particular figure that shows they are responsible for 100 percent of all serious sexual assault crimes and 57.4 percent of all crimes. The data shows that even for the worst crimes, well over… […]
    • Video shows American elites heaping praise on China's Xi
      Jake Smith Daily Caller News Foundation A video on Wednesday depicted American business executives lauding Chinese President Xi Jinping’s leadership and efforts to bolster the U.S.-China relationship. The American executives had traveled to Beijing to attend the China Development Forum earlier in the week and met with Xi on Wednesday to discuss the importance of… […]
    • Visualizing the massively varied cost of an EpiPen across major markets
      (ZEROHEDGE) – EpiPens are auto-injectors containing epinephrine, a drug that can treat or reverse severe allergic reactions, potentially preventing death. The global epinephrine market was valued at $1.75 billion in 2022 and is projected to reach $4.08 billion by 2030. North America represents over 60% of the market. EpiPens, however, can be prohibitively expensive in… […]
    • Biden's HHS pushed child sex changes while simultaneously researching potential risks
      Robert Schmad Daily Caller News Foundation The Department of Health and Human Services (HHS) funded research into a litany of possible negative medical outcomes associated with transgenderism while simultaneously promoting sex-change procedures to minors and their families, public records show. HHS under President Joe Biden has promoted the use of hormone therapy among minors and… […]
    • Parents don't want schools to confiscate kids' phones
      (REASON) – A majority of American parents want kids to have access to their phones at school, a new survey finds. In addition, most parents think cellphones have a positive effect on their kids' lives. Debates over teens and smartphones often contain the (assumed or explicit) premise that parents want their kids to stop living… […]
    • Professors get $1 million to apply 'critical race studies' to the classics
      (THE COLLEGE FIX) – Critical race theory will be applied to the classics thanks to a $1 million grant given to two Ivy League professors. The Mellon Foundation granted the funds to Brown University Professor Sasha-Mae Eccleston and Dan-el Peralta, a Princeton University professor, for their “Racing the Classics” fellowship. Get the hottest, most important… […]
    • University nursing program gets 'racial healing' grant for DEI curriculum
      (THE COLLEGE FIX) – Elmhurst University will hire a “diversity, equity, and inclusion” consultant to revise its nursing program. The $25,000 “racial healing” grant from Illinois will “help the department ensure its Master of Science in Nursing (MSN) curriculum fully integrates diversity, equity and inclusion concepts,” according to a March news release. Get the hottest,… […]
    • Special-needs children shoved aside for illegal kids
      (INDEPENDENT SENTINEL) – There are so many illegal immigrant children pouring into Manhattan schools that they might push school children with disabilities and special needs out of an academic building and into an “inadequate” site. The school, West Prep Academy, reportedly serves 170 students, mainly children with special needs. The school is being overrun by… […]
    • Biden trying to delay trans athlete demands until after election
      By Kate Anderson Daily Caller News President Joe Biden’s administration is reportedly halting the release of a Title IX rule that would require biological men to be allowed to compete in women’s sports until after the election due to the issue being unpopular with a majority of voters, The Washington Post reported Thursday. In April… […]
    • Polling shows voters ready to flee U.S. over 'politics'
      Every election there are a few celebrities who try to interfere in the vote by threatening to their fans they will move out of the United States if a candidate, usually a Republican, wins. They never follow through, despite social media volunteers who would help them pack. But now that attitude has spread, and a… […]
  • Enter My WorldView