JAKARTA (TheInsiderStories) – The Federal Reserve (Fed) chairman, Jerome Powell, said the United States (US) economy has a long way to go before fully recovering from the pandemic and will need further support. He delivered the message in the Capitol Hill meeting on Tuesday (09/23).
He asserted, The Fed, along with others across government, is working to alleviate the economic fallout. The central bank also remain committed to using their tools for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy, he adds.
According to him, economic activity has picked up from its depressed second-quarter level, when much of the economy was shut down to stem the spread of the virus. The chairman said, many economic indicators show marked improvement.
Household spending have recovered about three-fourths of its earlier decline, likely owing in part to federal stimulus payments and expanded unemployment benefits. The housing sector also has rebounded, and business fixed investment shows signs of improvement.
In the labor market, Powell explained, roughly half of the 22 million payroll jobs that were lost in March and April have been regained as people return to work. Both employment and overall economic activity remain well below the pre-pandemic levels, and the path ahead continues to be highly uncertain.
“Since mid-March, we have taken forceful action, implementing a policy of near-zero rates, increasing asset holdings, and standing up 13 emergency lending facilities. We took these measures to support broader financial conditions and more directly support the flow of credit to households, businesses of all sizes, and state and local governments,” he told the Congress.
The Fed actions, said Powell, have helped unlock more than US$1 trillion of funding, which, in turn, has helped keep organizations from shuttering, putting them in a better position to keep workers on and to hire them back as the economy continues to recover.
He concluded, “Our economy will recover fully from this difficult period. We remain committed to using our full range of tools to support the economy for as long as is needed.”
Earlier, Power has give a signal that the Fed Fund Rate (FFR) will stay near zero percent until 2023. While, the Federal Open Meeting Committee (FOMC) decided to kept the target range for the FFR at 0 to 0.25 percent for September.
He also warned that a lack of further fiscal support from Congress and President Donald Trump could “scar and damage” a US economy restrained by the pandemic. But he optimism that Democrats and Republicans would find a path forward on another COVID-19 relief bill despite a weeks-long stalemate between both negotiators.
Powell also mentioned, the differences between the current economic downturn and past periods of contraction including the financial crisis. He asserted, “This really was a natural disaster that hit an economy that was doing well with a banking system that was well capitalized and highly liquid, and understood its risks pretty well.”
In the official statements, the policymakers expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the committee’ assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. The governors also stated on an uncertain economic rebound without further stimulus.
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