Federal Reserve Chair Jerome Powell reiterated his belief Friday that while the U.S. economy has been steadily rebounding from the devastation caused by the pandemic recession, the recovery is far from complete and needs continued support from the Fed.
In an opinion piece posted Friday in the Wall Street Journal, Powell characterizes the economy as much improved, with about half the 20 million jobs that were lost to the pandemic having been recovered and with the outlook brightening as vaccinations are more widely administered.
Yet he adds, “The recovery is far from complete, so at the Fed we will continue to provide the economy with the support that it needs for as long as it takes.”
Powell’s message reinforces points he made Wednesday at a news conference after the Fed’s latest policy meeting. When the meeting ended, the central bank’s policymakers issued updated forecasts that sharply upgraded their outlook, with the economy expected to accelerate quickly this year. At the same time, their consensus forecast showed that the officials expect to keep their benchmark rate pinned near zero through 2023, despite concerns in financial markets about potentially higher inflation.
In his opinion piece, Powell says that in February 2020, he and other Fed officials had been monitoring the Covid-19 outbreak in China but didn’t think it would cause major harm in the United States. But he says that at a meeting he was attending of finance officials from the Group of 20 major industrial countries, it became clear that the virus was spreading quickly and widely.
He left that meeting, he writes, “with the conviction that its effect would not be confined to faraway lands, as I had thought, but would reach every part of the globe.”
One week later, in early March, the Fed held an emergency policy meeting with what Powell says was one agenda item: “How could we help people get through what was going to be a terribly difficult time?”
The officials concluded, he says, that they had to act forcefully because “the danger to the U.S. economy was grave.”
The central bank proceeded to slash its key short-term interest rate to a record low, started providing support to keep long-term rates low through the purchase of billions of dollars in bonds and established a series of emergency loan facilities to support the financial system.
Even with the Fed’s rapid and broad-based response, Powell notes that the “ensuing downturn was unprecedented in speed, breadth and intensity.”
“The pandemic inflicted a cruel and uneven toll on lives and livelihoods,” the Fed chair writes.
But, he says, “I truly believe that we will emerge from this crisis stronger and better, as we have done so often before.”