Powell presses Congress on more relief, warning of ‘tragic’ scenario for economy
Federal Reserve Chair Jerome Powell on Tuesday said Congress should err on the side of overdoing it with the next economic relief bill, saying a conservative approach could imperil a rebound from the coronavirus recession.
In remarks to the National Association for Business Economics annual meeting, Powell warned of a "tragic" scenario where "a long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy." He said too little support from policymakers would "lead to a weak recovery, creating unnecessary hardship for households and businesses."
"Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth," he said. "By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste."
Powell issued the warning as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continue negotiations over potential economic relief legislation. They have been at odds over the size of the deal, and it's unclear if they will be able to reach an agreement.
In a statement released just after Powell's appearance, Pelosi quoted the Fed chair's speech and said the moment was "long overdue" for Republicans to agree on a bill.
"Chairman Powell’s warning could not be more clear: robust action is immediately needed to avert economic catastrophe from the devastation of the coronavirus pandemic," she said.
The Fed under Powell's leadership has taken extraordinary steps to rescue the economy since March. On Tuesday, he said the recovery will be "stronger and move faster" if monetary policy and fiscal policy "continue to work side by side to provide support to the economy until it is clearly out of the woods."
Powell made it clear that the Fed was in no rush to abandon its recent intervention into financial markets. He defended decisions to lend to corporations and state and local governments as part of its sweeping coronavirus response.
"I don't know how I would have been able to explain to the public that we didn't go to the limit of what we could do," he said. "I have never regretted the fact that we did that."
Powell said a day would come to put the "emergency" measures "under lock and key" but that it wasn't the time to do so.
"We're going to keep at it until we are very far along and sure that we're out of the woods," he said. "We're in no hurry to stop doing what we're doing. But when the time does come, we will put these away. We're not looking to find ways to keep them in place and take on new and different roles."
Beyond potential relief efforts, Powell said another key measure to fending off a further downturn would be to follow medical experts' guidance during the pandemic "including using masks and social-distancing measures." President Donald Trump has flouted those safeguards in recent days during his treatment for Covid-19.
