US Federal Reserve chair Jerome Powell today warned that the US faces an “extended period” of weak growth and stagnant incomes, and pledged to continue to intervene in the economy, and issued a call for additional fiscal spending.
“It will take some time to get back to where we were,” Powell said. “There is a sense, growing sense I think, that the recovery may come more slowly than we would like. But it will come, and that may mean that it’s necessary for us to do more.”
Powell said the Fed would not push interest rates below zero, despite widespread speculation and bets from traders.
Negative interest rates “not something that we are considering,” he said.
The Fed has slashed interest rates to near zero and set up a network of initiatives to ensure financial markets continue to function during the pandemic.
The US response “has been particularly swift and forceful,” Powell said in the webcast by the Peterson Institute for International Economics. “But the recovery may take some time to gather momentum,” and would be dictated by progress fighting the pandemic, he added.
The worst case outcome leaves the economy mired in “an extended period of low productivity growth and stagnant incomes … Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said.
“This trade-off is one for our elected representatives, who wield powers of taxation and spending.”
The US House of Representatives and Senate are deliberating further responses to the pandemic, which has killed about 81,000 people in the US.
Nearly 3.2m workers applied for unemployment benefits in the US in a week in the last US jobless claims data published on & March.
Approximately 33.5m US workers have filed for jobless aid since the coronavirus pandemic began.