Powell: "US Economic Downturn Risk Very Serious"

Strong Warning of Prolonged Recession
Repeated Emphasis on the Need for Fiscal Policy Support

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] "If Congress and the White House do not provide additional support, an unprecedented economic downturn will permanently damage the economy."

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), suggested that economic recovery in the United States may be impossible and insisted that additional fiscal support is absolutely necessary. While he expressed optimism about economic recovery after the end of the COVID-19 pandemic earlier last month, this time he raised the warning level significantly.

On the 13th (local time), Powell attended a virtual meeting hosted by the Peterson Institute for International Economics (PIIE) and said, "The U.S. economy is facing the most severe recession since World War II."

He expressed concern, saying, "The risk of economic downturn is serious. A deep and prolonged shock could have a lasting impact on productive capacity," and explained, "There is a growing recognition that 'the economy will recover once the COVID-19 situation settles, but the pace may not be as fast as expected.'" He added, "This situation means we need to take additional action." Regarding negative interest rates, he repeatedly shook his head, saying, "The Fed's view has not changed."

The financial market reacted immediately that day. Risk assets such as stocks fell, while safe-haven assets like gold prices rose. On that day, the Dow Jones Industrial Average closed at 23,247.97, down 2.17%. Gold closed at $1,716.40 per ounce, up 0.6% from the previous day.