The US economy will not fully recover from the coronavirus pandemic until the American people are sure that the outbreak has been brought under control, Federal Reserve chair Jerome Powell said.
“Until the public is confident that the disease is contained, a full recovery is unlikely,” Powell told US lawmakers.
In the first of two days of hearings before the Senate Banking Committee, Powell mapped out how the United States faces an uncertain, uneven and prolonged economic recovery from the novel coronavirus crisis.
“The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures,” Powell said.
The Fed last week kept interest rates unchanged near zero and made clear it plans years of extraordinary stimulus as the nation grapples with steps toward fully reopening its economy amid state and local surges in cases, and with no vaccine in sight.
Congress has so far allocated nearly $3 trillion in financial relief, including direct payments to households and a forgivable loan scheme for small businesses, while the Fed has implemented numerous programs to pump trillions of dollars of credit into the US economy.
On Monday, the Fed launched its long-awaited Main Street lending program, which will offer up to $600bn in loans to US companies with up to 15,000 employees or with revenues up to $5bn.
In his prepared testimony to the Committee, Powell reiterated that there will be no quick fix to heal the economy, saying again that the Fed will use its full range of tools to help the process.
He also said that direct financial support to families and businesses makes “a critical difference” in limiting long-lasting damage.
Powell and other Fed officials have increasingly said Congress may need to do more to prevent long-term economic scarring caused by the pandemic and the Fed warned in its semi-annual report to lawmakers on Friday that it expects households and businesses to suffer “persistent fragilities”.
There are currently roughly 20m people unemployed in the US as a result of the epidemic, which has killed more than 115,000 people in the country, with minority communities among those hardest hit on both fronts.
“If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing,” Powell said.
Fed officials currently forecast the economy shrinking at a 6.5 per cent annualised rate in 2020 and see unemployment remaining elevated for several years.
Powell has previously said he sees millions, particularly low-wage workers, remaining out of work for the foreseeable future with no easy re-entry into employment.