- October 7, 2020
- Posted by: Stratford Team
- Category: Business
Federal Reserve chairman Jerome Powell on Tuesday called for more government spending to support the nation’s nascent economic recovery from the coronavirus pandemic.
Both the central bank and Congress should continue their aggressive efforts to shore up the economy even though employment, consumer spending and other key measures have rebounded from their collapse in the spring, Powell argued in a virtual speech to the National Association for Business Economics.
The risks of policymakers “overdoing it” with stimulus are fairly small, Powell said, but providing too little support would weaken the recovery by leading to more bankruptcies, hurting productivity and choking wage growth.
“Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” Powell said. “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.”
Powell and other Fed officials have urged Congress to pass another spending package to blunt the economic damage from COVID-19 as the central bank injected trillions of dollars into financial markets and slashed interest rates to near zero.
Powell’s latest comments came as the Trump administration and House Speaker Nancy Pelosi worked to hash out a stimulus deal. President Trump expressed support for a spending bill while he was hospitalized with the coronavirus over the weekend, but it remains uncertain when an agreement will be reached.
The recovery remains “incomplete” even though stimulus efforts so far — including March’s $2.2 trillion CARES Act — have helped prevent the recession from spiraling further out of control, Powell said.
He also noted that the “burdens of the downturn have not been evenly shared,” with women and people of color suffering deeper job losses than other groups.
“Combined with the disproportionate effects of COVID on communities of color, and the overwhelming burden of childcare during quarantine and distance learning, which has fallen mostly on women, the pandemic is further widening divides in wealth and economic mobility,” Powell said.