Powell: "Economic Recovery Very Uncertain... Recovery Speed Depends on COVID-19 Containment" (Comprehensive)

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), emphasized on the 10th (local time) that "the speed of the U.S. economic recovery is very uncertain" and that the future pace of economic recovery depends on the containment of the novel coronavirus infection (COVID-19).

Chairman Powell made these remarks during a virtual press conference held after the Federal Open Market Committee (FOMC) decided to keep the benchmark interest rate unchanged.

Powell stressed, "A full economic recovery will not occur until people are confident that it is safe to resume widespread activities."

FOMC members forecast that the U.S. economy will record a 'minus growth' of 6.5% this year and recover to a 'plus growth' of 5% next year.

Regarding the Fed's indication through the dot plot to maintain zero interest rates until 2022, Powell responded to questions about additional preemptive guidance by saying, "Fiscal policy is in a good state," and "We are watching other tools such as yield curve control."

He particularly reiterated, "We are not considering raising interest rates. We are not considering any increases at all." He also argued that this crisis is quite different from the Great Depression. Since the economy was in a good condition and the financial system was sound, it is difficult to simply compare the Great Depression of the 1930s with the current COVID-19-induced economic crisis.

Chairman Powell also emphasized his stance to use all means available for economic recovery and stressed the need for additional congressional support bills for economic recovery.

While Main Street lending to support the real sector such as small and medium-sized enterprises, rather than the financial sector, is being prepared at the Fed level, he said it is still too early to fully implement it but expressed the view that support is not too late yet.

He also showed determination to recover from the large-scale unemployment crisis. Powell said, "We need to get people back to work. That is the goal. We will maintain this goal until it is achieved." However, Powell mentioned that the unemployment situation seemed to have passed its worst point in May. The Fed expects the U.S. unemployment rate to reach 9.3% by the end of this year.

He also emphasized the need for equal opportunities for all races in response to racial discrimination issues following the death of Black man George Floyd. He added, "There can be no racial discrimination at the Fed." Furthermore, he expressed concern that Black and Hispanic people working in low-wage sectors have suffered the most from the COVID-19 crisis.

The statement released by the Fed on this day also showed some changes. The Wall Street Journal reported that a part of the previous statement which said, "Disruptions to domestic and international economic activity are having a significant impact on the financial system, and it is difficult to cope with this," was changed in this month's statement to, "Financial conditions, including credit flows to U.S. households and businesses, are improving."

Regarding asset purchases, the Fed used the term "asset expansion" instead of "purchases." The part about buying as much as needed was revised to "as much as currently needed."