Calling the pandemic and its fallout “the biggest shock to the U.S. economy in living memory,” Federal Reserve Chairman Jerome Powell once again said he and his colleagues are committed to using all the tools at their disposal, but he declined to advise lawmakers, who are debating another aid package.
“Fiscal policy is up to congress,” he said during a news conference that followed a two-day meeting of the Federal Open Market Committee. The group announced it decided to keep interest rates near zero, as expected.
During the economic downturn, millions of out-of-work Americans have been eligible for additional unemployment benefits known as Pandemic Unemployment Assistance, which amount to $600 per week per claimant. Politicians in both parties acknowledge it has been a lifeline during this unprecedented crisis. However, barring congressional action, the program will expire in a few days.
In speeches and interviews, and in his comments on Wednesday, the Fed chair has suggested the U.S. economy would benefit from additional fiscal support, but he has not mentioned specifics.
“Fiscal policy is essential here,” Powell said. “I see Congress negotiating over a new package, and I think that is a good thing.”
Two of his predecessors, Ben Bernanke and Janet Yellen, testified on Capitol Hill this month, and in their first appearance before lawmakers since they left government, both former Fed chairs were less shy. They made the case for continuing to offer an expanded jobless benefit, and they rejected an argument many Republicans have made, that the program disincentivizes the unemployed from looking for work.
In a statement following the meeting, Federal Reserve policy makers nodded to the gravity of the current situation, and the ambiguity surrounding the timing of an economic recovery.
“The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world,” they wrote. “Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.”
Since the pandemic started, and the economy ground to a halt, the Fed chair has stressed that there can be no economic recovery until the COVID-19 virus is under control.
“The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy,” the FOMC said in its statement.
Economists and investors continue to hope for more forward guidance from the Fed, about how long it will keep new policies and programs in place, and what a full recovery will look like. During his remarks, the Fed chair said it is all but certain there will be no change for the foreseeable future.
“We are not even thinking about ‘thinking about’ raising rates,” he said. “We are in this until we are well through it.”