Citing the unprecedented speed and scope of the coronavirus-induced economic downturn, Federal Reserve Chair Jerome Powell said Wednesday the central bank may take additional steps to avoid an extended period of low productivity growth and stagnant incomes.
“At the Fed, we will continue to use our tools to their fullest until the crisis has passed and the economic recovery is well under way,” Powell said during a webcast hosted by the Peterson Institute for International Economics.
However, Powell signaled the Fed remains reluctant to impose negative interest rates, which President Donald Trump has repeatedly called on the central bank to enact.
“I know there are fans of the policy, but for now it’s not something that we’re considering,” Powell said. “We think we have a good toolkit and that’s the one that we will be using.”
The Fed Chief noted the economic outlook is “both highly uncertain and subject to significant downside risks” and suggested it may be necessary for Congress to provide additional stimulus.
“Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said. “This tradeoff is one for our elected representatives, who wield powers of taxation and spending.”
Powell’s comments come a day after House Democrats unveiled a new $3 trillion coronavirus relief bill that is likely to face considerable opposition in the Republican-led Senate.
While the Fed and Congress have already provided considerable stimulus that Powell described as “both timely and appropriately large,” he noted the initial response “may not be the final chapter.”
Powell argued the coronavirus pandemic raises a new set of questions, including how quickly it can be brought under control, whether new outbreaks can be avoided as the economy reopens and how long it will take to develop new therapies or a vaccine.
“The answers to these questions will go a long way toward setting the timing and pace of the economic recovery,” Powell said. “Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.”
Source: Read Full Article