Fed’s Powell warns U.S. economy ‘long way from a full recovery’

Federal Reserve Chair Jerome Powell on Wednesday warned that the U.S. economy is still struggling with the coronavirus pandemic and said lawmakers should ignore concerns about inflation when considering more direct payments to American consumers.

Powell, in a press conference after the Fed's policy-setting meeting, praised Congress for its actions so far but said the economy is “a long way from a full recovery,” citing the millions of unemployed workers, including the many who have dropped out of the labor force.

President Joe Biden has proposed a $1.9 trillion economic-relief package on top of the $908 billion spending plan that Congress passed last month. It includes one-time $1,400 payments to most households as well as enhanced benefits for the jobless. Republicans are balking at the price tag, saying Congress should wait until the December spending spreads throughout the economy.

Powell declined to comment directly on whether more relief was needed but emphatically rejected fears that more direct checks could lead to troubling price spikes — doubling down on the Fed’s pledge to keep interest rates low to allow as many people back into the labor force as possible. Inflation has remained muted for years, despite warnings from some GOP lawmakers that it was bound to accelerate because of the Fed's low-rate policy.

“I’m much more worried about falling short of a complete recovery and losing people’s careers and lives that they built because they don’t get back to work in time,” Powell said. “I’m more concerned about that and the damage that will do, not just to their lives but to the United States economy.”

He also underscored the importance of getting the virus under control. (He told reporters that he has received the first dose of the vaccine.)

“There’s nothing more important to the economy now than people getting vaccinated,” Powell said. “We haven’t won this yet.”

The Fed’s rate-setting committee left interest rates unchanged at near zero percent. In its post-meeting statement, the policymakers struck a more somber tone than before about the economy, saying the recovery is weakening as the country waits for widespread vaccinations.

“The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” the central bank said. That contrasts with its observation last month that the economy had “continued to recover.”

Economic pain is still acute for tens of millions of people and for businesses across the country amid the pandemic, which has taken the lives of more than 400,000 Americans. Service industries such as restaurants and hotels have suffered the most in the pandemic, with Black and Hispanic workers disproportionately affected.