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Failure to provide more support for households and businesses hit by the coronavirus pandemic could have “tragic” economic consequences, the Federal Reserve chair, Jerome Powell, warned on Tuesday.
As Congress remains gridlocked over a new round of stimulus in the wake of the coronavirus recession, Powell warned: “The expansion is still far from complete.”
“At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship,” he told a virtual economics conference.
Republicans have warned against providing too much money for the unemployed, arguing the cash is a disincentive for people to return to work. But the risks associated with overly generous relief were smaller, Powell said: “Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
In contrast a prolonged slowdown could exacerbate existing racial and wealth disparities in the economy, which “would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic”, Powell said.
Despite repeated rounds of negotiation between the House speaker, Nancy Pelosi, and the treasury secretary, Steven Mnuchin, it remains uncertain whether Republicans and Democrats will break a deadlock to extend unemployment benefits that lapsed in July, or provide additional aid to hard-hit businesses, cities and states.
Powell was careful to sidestep the political quagmire, or address signs that the US economy is settling into a divergent K-shaped recovery, saying the early fiscal response to the pandemic was “truly extraordinary” and the “most innovative” since the Great Depression.
“The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods,” he said.
The US has replaced roughly half of the 22m jobs lost in March and April during the lockdown, and the unemployment rate fell to 7.9% in September, from nearly 15% in April.
In an illustration of the effects on industry, Boeing said on Tuesday in its first market forecast since the coronavirus pandemic began that sales of airliners will contract sharply over the next decade before rebounding in the 2030s as new models and greener technologies emerge.
The Chicago-based aviation giant predicted that planemakers will deliver 18,350 commercial aircraft worth $2.9tn through decade’s end, or 11% fewer than the company anticipated last year.
“We’re a long way from the bottom, which was mid-April, and it’s a long way back from here to full recovery,” Darren Hulst, Boeing’s vice-president of commercial marketing, said at a briefing.
The forecast comes as carriers endure record drops in passenger numbers and revenue and have announced plans to cut tens of thousands of jobs if no new government financial support is forthcoming.
Source: The Guardian
Keyword: Fed chair warns of ‘tragic’ consequences without further Covid relief | Business