Economy

Fed’s Powell says full economic recovery may require coronavirus vaccine

Fed’s Powell says full economic recovery may require coronavirus vaccine”

He praised a move by Congress to recently green-light new stimulus spending, suggesting it "may be that" the Fed may need to further extend a helping hand, or the Congress "has to do more".
In an interview with CBS 60 Minutes aired Sunday, he said the economic recovery could take more than a year and "stretch through the end of" 2021. "There's no clear finding that it actually does support economic activity on net".

"However, incoming data from most economies highlight the depth of the contraction, raising risks of longer-term scarring that might undermine the recovery". It could stretch through the end of next year. "We really don't know".

Under the best of circumstances it will be a long road, Powell said, with additional job losses likely through June, a rebound that takes time to "gather steam", and some parts of the economy like the travel and entertainment industries possibly under pressure until there is a vaccine.

The Fed chair also reiterated that central bank will use "our full range of tools to support the economy in this challenging time".

"There's a lot more we can do". On Sunday night, Powell said the Fed's programs were essentially unlimited, helping to spark a stock market rally Monday.

Fed’s Powell says full economic recovery may require coronavirus vaccine

That could be a veiled reference to yield curve control, where the Fed undertakes to hold yields out to a certain maturity at a certain level, as the Bank of Japan already does.

Mr Powell's remarks follow his grave warning last Wednesday that the U.S. economy faces lasting harm from the pandemic if the government does not step up.

He will go on to say that the historic $2.2 trillion relief package passed by Congress in March, known as the CARES Act, was "critical in enabling the Federal Reserve and the Treasury Department to establish" lending programs in a bid to keep struggling businesses afloat.

He also declined to be drawn into the debate on when the USA economy should reopen, beyond saying it should happen carefully to minimise the risk of sparking more infections.

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