The course of the US economic recovery is “extraordinarily uncertain” in the face of the “new challenges” caused by the coronavirus pandemic, Federal Reserve (Fed) President Jerome Powell warned on Tuesday in an appearance before the Congress.
“Production and employment are well below pre-pandemic levels. The path of the economy is extraordinarily uncertain and will largely depend on our success in containing the virus,” Powell told lawmakers at the House of Representatives financial committee.
Powell’s appearance comes amid the spike in COVID-19 infections, with more than 40,000 new cases daily, which the country is experiencing, especially in the south and west, amid the process of reopening and gradually lifting the restrictions.
The head of the US central bank added that “it has entered an important new phase sooner than expected,” but noted that although this “rebound (revival of the economy) is welcome, it presents new challenges, mainly keeping the virus at bay.”
Since the outbreak of the crisis in the US in mid-March, the Fed has cut interest rates to almost zero and launched a huge program of monetary stimulus through liquidity injections and debt buybacks, while Congress approved later that month the largest fiscal aid package in the history of the country, for more than 2.2 trillion dollars.
Weighing this, the US is experiencing a sharp recession that has caused a massive wave of layoffs and has caused the unemployment rate to skyrocket from 3.5% at the beginning of the year to 13.3% in May, and is expected to end. 2020 with an economic contraction of 8%.
Along with Powell, also appears this Tuesday in the US Congress, Treasury Secretary Steven Mnuchin, who has already advanced that a second fiscal stimulus package will probably be necessary given that most of the benefits of the first conclude in July.