Powell Warns Of Weak Growth
Market Crumbs | May 14, 2020 07:46AM ET
Federal Reserve Chairman Jerome Powell spoke yesterday at the Peterson Institute for International Economics, providing a somber tone on the economy and what needs to be done to help soften the blow.
Powell said the U.S. economy could face an "extended period" of weak growth, warning "deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy."
Powell referenced a recent Federal Reserve survey that estimated 40% of households earning less than $40,000 in income consist of someone who has lost their job since February.
Despite the slew of policy actions taken to help stimulate the economy, Powell believes more may be needed.
"While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks," Powell said.
"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 joined the slew of Federal Reserve members who this week have pushed back against the idea of negative interest rates.
"I know there are fans of the policy, but for now it’s not something that we’re considering," tweeted earlier this week "As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the 'GIFT'. Big numbers!"
Powell seemed confident that the economy will recover, eventually.
"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."
As the coronavirus continues to takes its toll on the U.S. economy, it will be interesting to see if further damage to the economy or stock market will push Powell and the Federal Reserve to reconsider taking rates into negative territory.
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