Powell: US recovery could take till end of 2021

18 Mai, 2020, 09:58 | Auteur: Auguste Feret
  • Powell: US recovery could take till end of 2021

"In the long-run and even in the medium-run, you wouldn't want to bet against the American economy", he says. Asked whether the economy could heal without an effective vaccine, Mr. Powell suggested that activity could restart before a treatment became available without making a complete rebound.

But he repeated his message that the economy likely will need more government spending to support workers and businesses to allow the economy to recover, beyond the almost $3 trillion already approved by Congress.

His statement came days after a top economic advisor to President Donald Trump favoured giving tax incentives to American companies to move their manufacturing units from China to the USA, amidst a new rift in the bilateral relationship over Beijing's handling of the coronavirus crisis.

The Fed rushed in even before the economic lockdowns were fully in place, slashing the benchmark lending rate and pumping trillions of dollars into the financial system and into lending programs to support corporations, small- and medium-sized businesses and state and local governments.

Observing that this is a time of great suffering and difficulty, Powell said that it has come on the Americans so quickly and with such force that one really can not put into words the pain people are feeling and the uncertainty they are realising. While unemployment could peak at 20 to 25 percent, a level not seen since the 1930s, Powell said he remains confident the country will avoid another depression. And that's by keeping people and businesses out of insolvency just for maybe three or six more months while the health authorities do what they can do.

"It may well be that the Fed has to do more", he said.

Powell: US recovery could take till end of 2021

In the meantime, he said, the Federal Reserve or Fed and Congress may need to do more to ensure people can pay their bills.

Republicans and the White House have alternately sounded open to additional rounds of support and hesitant to spend more money given the trillions already being pumped into the economy. As Congress debates possible further economic relief, Powell has stretched the limits of typical central bank commentary, directly calling for more fiscal spending. The Fed has approved a suite of programmes as well to help businesses and financial markets function during the pandemic and to try to limit personal and corporate bankruptcies. Powell said the Fed could also adjust the forward guidance it provides to markets and the pace of its asset purchases.

The Fed could also provide more explicit guidance on how long it will keep rates pegged at almost zero and the extent of its bond-purchase programs, Powell said. "But we don't really think so at the Federal Reserve".

Powell previously spoke to 60 Minutes in March 2019.

The unemployment rate surged to 14.7 percent in April and the United States economy shrank by 4.8 percent on an annualised basis in the first quarter.

But "it's going to take a while for us to get back", he said. It may take a period of time.

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