- The economic recovery from the coronavirus pandemic may be a slow one, Fed Chair Jerome Powell said in a Wednesday event for the Peterson Institute for International Economics.
- He added that more fiscal support could be necessary to avoid long-term economic damage.
- "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.
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Federal Reserve Chair Jerome Powell cautioned that the US economic recovery from the fallout due to the coronavirus will likely be slow and require more fiscal stimulus.
The recovery "may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems," Powell said in a Wednesday event for the Peterson Institute for International Economics.
He continued: "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's remarks come just two months into the worst economic downturn since the Great Depression. In April the US economy lost a record 20.5 million jobs, and saw the unemployment rate spike to 14.7%, the highest since the Great Depression.
Long stretches of unemployment can leave families in greater debt, Powell said. In addition, losing thousands of small and medium-sized businesses "would destroy the life's work and family legacy of many business and community leaders and limit the strength of the recovery when it comes," he said.
Read more: MORGAN STANLEY: Buy these 20 stocks built to profit from a mounting inflation comeback that will alter the investing landscape
Powell cheered the actions of the government so far, noting how swiftly different groups have acted to send relief to Americans. The Federal Open Market Committee slashed interest rates to zero in March, and has since gone beyond its 2008 playbook with emergency lending and buying programs to support the economy.
Congress has allocated nearly $3 trillion in funding to support small businesses, American households, and more.
Still, there could be more to come. "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.
An additional $3 trillion coronavirus relief bill was proposed by House Democrats Tuesday. The Fed also took another unprecedented step this week when it began buying corporate bond exchange-traded funds.
When the crisis subsides, Powell said that the central bank will "put these emergency tools away." Still, he reaffirmed the central bank's "whatever it takes" approach to provide support until the crisis has passed and the economic recovery is underway.
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