Fed's Powell warns economic recovery will be slow

Video credit: Reuters Studio
Published on May 13, 2020 - Duration: 02:07s

Fed's Powell warns economic recovery will be slow

Federal Reserve Chair Jerome Powell, in a sober review of where the U.S. economy stands on the cusp of its reopening, warned on Wednesday of an "extended period" of weak growth and stagnant incomes, pledged to use more of the central bank's power as needed, and issued a call for additional fiscal spending.

Conway G.

Gittens has more.

Fed's Powell warns economic recovery will be slow

SOUNDBITE (ENGLISH): FEDERAL RESERVE CHAIRMAN JEROME POWELL, SAYING: "The recovery may take some time to gather momentum." Federal Reserve Chairman Jerome Powell delivered a word of warning Wednesday as parts of the U.S. economy begin to reopen: Don't expect a quick economic rebound.

Though the Federal Reserve has taken unprecedented steps to limit the fallout from the economic crisis brought on by the coronavirus pandemic, Powell said it is likely the recovery will be slower than hoped, leading to an extended period of weak growth.

SOUNDBITE (ENGLISH): FEDERAL RESERVE CHAIRMAN JEROME POWELL, SAYING: "The record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy.

Avoidable household and business insolvencies can weigh on growth for years to come.

The loss of thousands of small and medium-sized businesses across the country would destroy the life's work and family legacy of many businesses and community leaders and limit the strength of the recovery when it comes.

The result could be an extended period of low productivity growth and stagnant incomes." But Powell wasn't all doom and gloom, saying in a webcast, the recovery will eventually come and pledged the Fed would continue to do all it can to make sure that happens.

That, however, will not include a push in interest rates to below zero.

President Trump has repeatedly urged for so-called negative interest rates.

SOUNDBITE (ENGLISH): FEDERAL RESERVE CHAIRMAN JEROME POWELL, SAYING: "The committee's view on negative rates really has not changed.

This is not something that we are looking at.

We choose not to implement negative rates during the global financial crisis and during the recovery and instead we relied as you pointed out on forward guidance and asset purchases when we were near the zero bound and we said we would continue to rely on those tools, which are tried and are now a part of our tool kit." A tool kit that has expanded beyond just near zero interest rates to a broad array of unprecedented programs to pump money into financial markets and prevent lending from drying up.

But Powell warned that more stimulus is needed and for that - he took the rare step of calling out the White House and Congress - urging the two to step up with more fiscal spending.

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