Federal Reserve Chairman Jerome Powell said the outlook for the United States economy is “extraordinarily uncertain” as the rise in Covid-19 cases continues to take an economic toll on the country.
“As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check.” Powell said in prepared remarks for his testimony on Tuesday to the US Senate Committee on Banking, Housing, and Urban Affairs. “The rise in new Covid-19 cases, both here and abroad, is concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities.”
Powell’s remarks echo comments he made earlier this month. At a virtual panel discussion at the European Central Bank’s Forum on Central Banking, Powell emphasized the economy’s recovery but noted that the economy that we knew before the coronavirus pandemic might be over.
But recent news of promising vaccines has Powell “very positive” for the medium term, though he expects “significant challenges and uncertainties including timing, production and distribution, and efficacy across different groups.”
“It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence,” he said.
Meanwhile, several programs employed by the Fed in March are set to expire at the end of the year. Powell said these programs help “unlock almost $2 trillion of funding.”
“These programs serve as a backstop to key credit markets and have helped restore the flow of credit from private lenders through normal channels. We have deployed these lending powers to an unprecedented extent,” Powell said in his remarks.
Treasury Secretary Steve Mnuchin, who will testify alongside Powell this week, said in a letter on November 19 that he is granting a 90-day extension of four of those programs “in an abundance of caution.” However, Mnuchin did not grant extensions for five other lending programs that include the corporate debt buying program and Main Street lending program.
Powell reiterated the Fed’s stance on using its policies to help lift the economic burdens onset by the pandemic, which have included keeping interest rates at zero and buying asset purchases at the current pace of $80 billion in Treasury securities and $40 billion agency mortgage-backed securities per month.