Fed Chair Powell: US economy faces 'longer-term concerns'

[Sergey Golubev]

Fed Chair Powell: US economy faces 'longer-term concerns'

Federal Reserve Chairman Jerome Powell said the central bank would continue to use its policy tools to mitigate the impact of the novel coronavirus on the U.S. economy, but warned that the length of the health crisis raises “longer-term concerns.”

Powell said in prepared remarks Wednesday that the depth and length of a recession can “leave behind lasting damage” to an economy’s productivity, a hint that those inside the Fed see slim chances of a quick, V-shaped recovery.

“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Powell said.

Powell said household and business insolvencies and the loss of small and medium-sized businesses could “limit the strength of the recovery when it comes,” adding that the loss of jobs risks widening the skills gap depending on how long the unemployed remain without work.

Powell pointed to a Fed survey being released tomorrow that details a 40% loss of jobs among households making less than $40,000 a year.

A weak recovery, Powell said, could also harm business investment which would limit the return of jobs in a recovery.

“We ought to do what we can to avoid these outcomes, and that may require additional policy measures,” Powell said in the virtual remarks at the Peterson Institute for International Economics.

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