Powell says recovery path is ‘extraordinarily uncertain’ amid efforts to control virus

Federal Reserve Chairman Jerome Powell holds a press conference after the two-day meeting of the Federal Reserve Open Market Committee in Washington on July 31, 2019.

Sarah Silbiger | Reuters

Federal Reserve Chairman Jerome Powell said big questions remain about the outlook for the economy, particularly in light of continued efforts to contain the coronavirus pandemic.

In remarks to be delivered Tuesday to the House Financial Services Committee, the central bank leader voiced concerns he had expressed earlier this month about growth as the United States remains mired in a recession that began in February.

“Production and employment remain well below their pre-pandemic levels. The way forward for the economy is extremely uncertain and will largely depend on our success in containing the virus,” Powell said.

“A full recovery is unlikely until people are sure that it is safe to re-engage in a wide range of activities,” he added. “The way forward will also depend on political actions taken at all levels of government to provide aid and support recovery for as long as necessary.”

His comments come amid a national spike in coronavirus cases rooted in states that have implemented more aggressively relaxed restrictions to contain the pandemic.

Powell stressed the importance of building on the recent momentum, which he says will build on the path of the virus.

“Many companies are opening their doors, hiring is increasing and spending is increasing. Employment moved higher and consumer spending rebounded strongly in May,” he said. “We have entered an important new phase and we have done so earlier than expected. While this rebound in economic activity is welcome, it also presents new challenges, in particular the need to keep the virus under control.”

In response to the pandemic, the Fed has implemented a variety of programs aimed at keeping markets running and lending directly where needed.

The Fed has also lowered its benchmark short-term loan rate to near zero, where Powell promised to keep it until the economy recovers.

“In March, we lowered our policy interest rate to near zero, and we hope to keep interest rates at this level until we are confident that the economy has withstood recent events and is on track to meet our maximum employment and price stability, “he said. “We will closely follow developments and are prepared to adjust our plans accordingly to support our goals.”