Federal Reserve Chair Jerome Powell said Thursday the economy can make a “fairly quick” and “robust” recovery from the deep and sudden recession triggered by the coronavirus pandemic but the Fed will be in no hurry to withdraw the extraordinary lending programs it has rolled out to ease the distress caused by the crisis.
Powell also said the Fed will continue to take aggressive steps until the economy is back on solid footing.
“There’s every reason to think we can be back on the road to recovery fairly quickly and that it can be a fairly robust recovery,” Powell said in remarks at the Brookings Institution. He said he sees the rebound materializing swiftly “as people to go back to work and resume a normal level of activity.
The U.S. economy largely has been shut down in recent weeks to contain the spread of the virus, with 43 states accounting for 95% of the population enacting stay-at-home orders and closing nonessential businesses, such as restaurants, stores, movie theaters and sports venues. Some 17 million Americans already have been laid off or furloughed and many analysts expect the economy to contract by 30% to 40% in the current quarter.
While most economists expect a strong rebound in the third quarter, assuming the pandemic eases and businesses reopen by summer, many believe there will be lasting effects and the economy will be smaller than it was before the crisis well into next year, with unemployment remaining elevated.
Powell, however, said, “We entered this turbulent on a strong economic footing, and that should help support the recovery.”
The Fed has lowered its key interest rate to near zero, renewed bond purchases that have pushed down long long-term rates and announced an array of lending programs valued at trillions of dollars to businesses, households, cities and states to support the flow of credit and cash in highly stressed markets. On Thursday, the Fed unveiled a new $600 billion lending facility for midsize businesses with up to 10,000 employees, among other programs.
Even as the economy begins to recover, “We will be in no hurry to pull back the asset programs or the other programs,” Powell said.
He also said the Fed is ready to do more.
“We will continue to use these powers forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery,” he said.
Powell downplayed the concern that the initiatives could stoke asset bubbles or inflation, noting similar worries about Fed bond purchases during the Great Recession of 2007-09 were unfounded.
“It is not a first order concern…that too high inflation may be coming in the near-term,” he said.