Fed Chairman Says Economy Faces New Challenges From Coronavirus

Federal Reserve Chairman Jerome Powell told lawmakers Tuesday that the reopening of the U.S. economy and recent upturn in spending and hiring came sooner than central bank officials had expected.

He also said the resumption of commercial activity entailing more close human contact carries risks, evidenced by recent increases in coronavirus infections and hospitalizations in states across the U.S. South and Southwest.

“We have entered an important new phase and have done so sooner than expected,” Mr. Powell said. “While this bounce back in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”

Mr. Powell testified at the hearing with Treasury Secretary Steven Mnuchin. The men sat with masks and at separate tables behind Plexiglas shields, and Mr. Powell wore his mask while speaking.

Congress has been considering how to structure further additional relief to address high unemployment and potential business failures resulting from the pandemic.

Mr. Mnuchin said he expected to work on a bipartisan basis on any additional spending measures in July. “We would anticipate that any additional relief would be targeted to certain industries that have been especially hard-hit by the pandemic,” he said.

The hearing before the House Financial Services Committee is part of quarterly appearances required by the $2 trillion relief package Congress approved in March, which provided more than $450 billion for the Treasury to cover losses in emergency-lending programs run by the Fed.

The Fed has established nine emergency-lending programs, including several to backstop lending to large and small companies, cities and states with $195 billion provided from the Treasury to cover losses.

“We are strongly committed to using these programs, as well as our other tools, to do what we can to provide stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy,” Mr. Powell said.
Source: Dow Jones