Powell warns of a possible sustained recession from pandemic
WASHINGTON (AP) — Federal Reserve Chair Jerome Powell warned Wednesday of the threat of a prolonged recession resulting from the viral outbreak and urged Congress and the White House to act further to prevent long-lasting economic damage.
The Fed and Congress have taken far-reaching steps to try to counter what is likely to be a severe downturn resulting from the widespread shutdown of the U.S. economy. But Powell cautioned that widespread bankruptcies among small businesses and extended unemployment for many people remain a serious risk.
“We ought to do what we can to avoid these outcomes,” Powell said.
Additional rescue aid from government spending or tax policies, though costly, would be “worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” he said.
Powell spoke a day after House Speaker Nancy Pelosi, a California Democrat, proposed a $3 trillion aid package that would direct money to small businesses, state and local governments and other beleaguered institutions. This money would come on top of roughly $3 trillion in earlier financial assistance that the government has provided. The Fed itself has also intervened by slashing interest rates to near zero and creating numerous emergency lending programs.
Yet Trump administration officials have said they want to see how previous aid packages affect the economy. And Republican leaders in Congress have expressed skepticism about allowing significant more spending right now.
“Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy,” the chairman warned in his prepared remarks before holding an online discussion with the Peterson Institute for International Economics. “Avoidable household and business insolvencies can...
