COVID-19 resurgence poses challenges to economic recovery: US Fed

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U.S. Federal Reserve Chairman Jerome Powell testifies at a hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs on Capitol Hill in Washington, D.C., the United States, Sept. 24, 2020. (Toni L. Sandys/Pool via Xinhua)

US Federal Reserve (Fed) Chairman Jerome Powell said on Monday that the rise in COVID-19 cases, both at home and abroad, could pose challenges to the economic recovery in the next few months.

“As we have emphasized throughout the pandemic, the outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check,” Powell said in his prepared testimony, which was posted Monday on the Fed’s website, for a congressional hearing scheduled on Tuesday.

“The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” Powell said.

While recent news on the vaccine front is very positive for the medium term, “significant challenges and uncertainties remain” for now, including timing, production and distribution, and efficacy across different groups, Powell noted.

“It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence,” he said.

Powell also said that the overall rebound in household spending is partly due to federal stimulus payments and expanded unemployment benefits, which had expired and provided essential support to many families and individuals.

Powell’s testimony came as Democratic and Republican lawmakers have been deadlocked for months over the size and scope of the next round of fiscal support.

“We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible on behalf of communities, families, and businesses across the country,” he said.

Fed officials may offer new guidance for asset purchases “fairly soon” as the central bank seeks to provide more support to the COVID-19 ravaged economy, according to the minutes of the Fed’s latest policy meeting released last week.

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