Federal Reserve Chairman Jerome Powell said Thursday the U.S. economy is in an emergency and is deteriorating “with alarming speed.” His remarks came shortly after the central bank unveiled over $2 trillion in new loans to keep the economy afloat as much of the nation goes into a lockdown to fight the spread of the deadly coronavirus.
“People have been asked to put their lives and livelihoods on hold, at significant economic and personal cost,” Powell said in a Brookings Institution webcast. “We are moving with alarming speed from 50-year lows in unemployment to what will likely be very high, although temporary, levels.”
Powell called for a national discussion about what it will take to reopen the economy, but he urged caution about moving too quickly and triggering another spike in coronavirus cases and deaths. Treasury Secretary Steven Mnuchin has said it’s possible businesses can reopen in May. Powell said sometime after July is more likely.
More than 17 million Americans have filed for unemployment aid in the past four weeks as the nation has entered a national emergency due to the global pandemic, the Labor Department reported Thursday. Powell said the burdens of the shutdown are “falling most heavily on those least able to carry them,” and he vowed to do everything he can to help.
The Fed’s sweeping new loan programs unveiled Thursday will provide $2 trillion in additional aid to small, medium and large companies as well as cash-strapped states and cities. The latest actions are in addition to the central bank slashing interest rates to zero in March and buying numerous government bonds in an effort to keep borrowing as cheap as possible for American families and businesses.
“Our emergency measures are reserved for truly rare circumstances, such as those we face today,” Powell said. “There is every reason to believe that the economic rebound, when it comes, can be robust.”
The Fed’s latest actions go even further than what the central bank did during the Great Recession. The Fed is now directly buying debt from large corporations and states, a level of support it hasn’t tried before. There’s widespread worry that some companies and households will go bankrupt during the pandemic because they will not be able to borrow money in time, but the Fed has taken large and unprecedented steps to keep as much credit flowing as possible.
Yet Powell and many top economic leaders are trying to answer two key questions: How deep, and how long, will the economic downturn be? Among Fed leaders, the growing consensus is the economic pain will be substantial, and the recovery will be slow.
There’s widespread agreement people must feel safe to go out again, and the worst possible outcome would be opening the economy too early, triggering another spike in coronavirus cases and deaths.
“We need to have a plan nationally for re-opening the economy. We all want it to happen as quickly as possible,” Powell said. “We all want to avoid a false start where we partially re-open and that results in a spike in coronavirus cases.”