The recovery from the coronavirus pandemic has gone faster than predicted, according to Federal Reserve Chairman Jerome Powell, but the central bank will not stop helping.
Powell said in congressional testimony released Monday that while the recovery appears to be improving, the US economy still has several weak spots.
In remarks prepared for a House Financial Services Committee oversight hearing on Tuesday, he said, “The sectors of the economy most adversely affected by the revival of the virus and by greater social distancing remain small.”
“We will continue to provide the economy with the resources it needs for as long as it takes,” Powell said.
Powell pointed out that the unemployment rate remains high at 6.2 percent, a figure that does not completely represent the number of unemployed Americans who have given up and left the workforce.
He said that the Fed would “not lose sight of the millions of Americans who are still suffering, including lower-wage service workers, African Americans, Hispanics, and other minority groups who have been particularly hard hit.”
The Federal Reserve held its key interest rate at a record low of 0% to 0.25 percent at its meeting last week. Despite raising its economic outlook dramatically, the Fed continued to signal that its benchmark rate would remain unchanged until 2023, giving financial markets a boost.
Powell and Treasury Secretary Janet Yellen will testify before a House panel on Tuesday, followed by a Senate Banking Committee hearing on Wednesday, as part of congressional oversight hearings required by last year’s relief legislation.
Powell praised the Federal Reserve, as well as local governments and corporations, for taking swift action. He also cited the initial COVID-relief packages, which included $1,200 in individual support grants, emergency unemployment aid, and billions in forgivable loans to small businesses, which were approved by Congress in March of last year.
Powell said, “While the economic fallout has been real and widespread, the worst has been prevented by swift and vigorous action.”
According to him, the situation is now improving.
“The number of new cases, hospitalizations, and deaths has decreased since January, and ongoing vaccinations give optimism for a return to more normal conditions later this year,” Powell wrote in his prepared testimony.
Powell stated that Congress passed the Cares Act a year ago, which gave the Treasury Department $454 billion to use as a backstop for the Fed’s emergency lending programs.
Powell stated in his testimony that the Fed’s lending programs had helped unlock nearly $2 trillion in credit for companies, cities, and states.
In a rare split between the Treasury and the Fed, then-Treasury Secretary Steven Mnuchin declared in November that he would let five emergency loan initiatives expire at the end of 2020, a move Democrats accused of being politically motivated to deny the incoming Biden administration the same economic support that the Trump administration had.
Those Fed services are no longer in effect, but Congress passed a $1.9 trillion relief package earlier this month after the Biden administration pressed for it.
Powell stated that the Fed would soon close its remaining emergency lending facilities, despite the fact that the Fed recently announced that it would expand its Paycheck Protection Program lending facility for another quarter in order to fund more small-business loans.
