Fed’s Powell says economy still needs fiscal, monetary support

FILE PHOTO: Senate’s Committee on Banking, Housing, and Urban Affairs hearing
FILE PHOTO: Federal Reserve Board Chairman Jerome Powell testifies during a Senate’s Committee on Banking, Housing, and Urban Affairs hearing examining the quarterly CARES Act report to Congress, in Washington, DC, U.S., September 24, 2020.
Drew Angerer/Pool via REUTERS/File Photo

By Howard Schneider and Ann Saphir, Reuters

The current surge in coronavirus cases is a big concern for an economic recovery that has a “long way to go,” Federal Reserve Chair Jerome Powell said on Tuesday, repeating a vow that the U.S. central bank would do all it could to nurse the economy back to health and calling again for more fiscal support.

The Fed is committed to “using all of our tools to support the recovery for as long as it takes until the job is well and truly done,” Powell said at a virtual event hosted by the Bay Area Council in California.

It is not yet time for the Fed to put away its emergency lending tools and it is much too early to even begin thinking about slimming its bond holdings, he said.

Indeed, he said, reprising a theme he has been hitting for months, the economy likely needs more fiscal support as well. The current rise in infections and hospitalizations due to the coronavirus is “very much a concern” because it could scare people from engaging in economic activity and slow the economy, Powell said.

There has been no recent movement toward new government support programs to extend a safety net for families and businesses expanded in a first round of fiscal relief in March.

Powell said the recent news that experimental vaccines had been highly effective in trials is “certainly good” in the medium term, but he noted that in the best case they won’t be widely available for months.

“With the virus now spreading at a fast rate, the next few months will be very challenging,” he said.