Jay Powell, the Federal Reserve chair, says the US will need to “keep the virus in check” as the world’s largest economy begins to rebound from the shock of the coronavirus pandemic.
In prepared testimony released ahead of a hearing before the House financial services committee on Tuesday, Mr Powell offered a more upbeat assessment of the current state of the economy than he has in the past.
But in the face of worrying spikes in cases across states ranging from Arizona to Florida and California, he cautioned that containing the outbreak needed to remain a priority.
“As the economy reopens, incoming data are beginning to reflect a resumption of economic activity: many businesses are opening their doors, hiring is picking up, and spending is increasing. Employment moved higher, and consumer spending rebounded strongly in May. We have entered an important new phase and have done so sooner than expected,” Mr Powell said.
“While this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check,” he added.
In his prepared remarks, the Fed chair added that the burden of the pandemic had fallen disproportionately on low-income households and minorities. Despite recent economic improvement, however, output and employment were still “far below their pre-pandemic levels”.
“The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus. A full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities,” he said.
The Fed chair defended the central bank’s actions since the crisis began, which have included cutting interest rates to zero, expanding its balance sheet through large-scale asset purchases and setting up various facilities to shore up markets — including one launched on Monday to buy newly issued corporate debt.
With some economists and lawmakers expressing concern that the response disproportionately favoured large companies and the wealthy, Mr Powell said the benefits were going to many households, companies of all sizes, and state and local governments.
“These programmes benefit Main Street by providing financing where it is not otherwise available, helping employers to keep their workers, and allowing consumers to continue spending,” he said.
“In many cases, by serving as a backstop to key financial markets, the programmes help increase the willingness of private lenders to extend credit and ease financial conditions for families and businesses across the country,” he added.
Mr Powell reiterated the Fed’s pledge to take additional action if necessary to help the economy: “Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.”
With emergency unemployment benefits of $600 per week set to expire next month and no sign of a deal on further fiscal stimulus, Mr Powell also hinted that Congress should consider further action.
“Direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy,” he said.