Federal Reserve Chairman Jerome Powell said Thursday that the economic rebound following the coronavirus-induced shutdown “can be robust” despite the sharp downturn.
In the meantime, he said the central bank is committed to doing whatever it can to support the flow of cash to businesses and households both through a plethora of financing programs and by keeping interest rates anchored near zero.
Powell spoke during a webinar for the Brookings Institution the same morning that the Fed announced a new $2.3 trillion financing initiative directed at small and larger businesses as well as households and state and local governments.
“At the Fed, we are doing all we can to help shepherd the economy through this difficult time,” he said in prepared remarks. “When the spread of the virus is under control, businesses will reopen, and people will come back to work. There is every reason to believe that the economic rebound, when it comes, can be robust.”
Powell added later that it was impossible to put a firm timetable on when the U.S. might turn the corner.
“When the virus does run its course and it’s safe to go back to work and it’s safe for businesses to open, then we would expect there to be a fairly quick rebound,” he said. “I think most people expect that to happen in the second half of this year after the second quarter. To try to be precise about where that will be, I don’t think that would be appropriate.”
As for the Fed’s efforts, he said central bank officials won’t be in a hurry to curtail any of liquidity and lending programs or the move to near zero for short-term benchmark interest rates. When it comes time to wind down the programs, he said the Fed will do so “gradually and predictably” and said it would be “in no hurry” to stop its open-ended asset purchases.
The economy received more bad news Thursday morning as weekly jobless claims hit 6.6 million, just a shade below the previous week’s record high.
Nevertheless, Powell pointed out that the economy has been strong before prevention efforts aimed at halting the coronavirus spread put a large share of the U.S. productive capacity offline.
“We entered this turbulent period on a strong economic footing, and that should help support the recovery,” he said. “In the meantime, we are using our tools to help build a bridge from the solid economic foundation on which we entered this crisis to a position of regained economic strength on the other side.”
But he added that while the Fed has worked to provide loans, Congress likely will have to provide direct cash injections to those areas of the economy that need it.
He also reiterated the Fed’s pledge to keep borrowing costs low as the efforts to stabilize the economy and subdue the virus continue.
“We have also committed to keeping rates at this low level until we are confident that the economy has weathered the storm and is on track to achieve our maximum-employment and price-stability goals,” he said.