MNI POLICY: Powell: Congress Action Can Limit Permanent Damage

By Greg Quinn and Evan Ryser

     WASHINGTON (MNI) - Fiscal action can help limit permanent economic damage

from Covid-19, Federal Reserve Chair Jerome Powell told lawmakers Tuesday,

although stopping short of calling for a fresh relief package, while affirming

the Fed will press ahead with QE and zero rates until markets stabilize and a

recovery materializes.

     "This direct support can make a critical difference not just in helping

families and businesses in a time of need, but also in limiting long-lasting

damage to our economy," Powell said of legislation like the CARES Act.

     "We are committed to using our full range of tools to support the economy

in this challenging time," he said in the text of his semi-annual testimony to

the Senate Banking Committee.

     --RATES NO HIGHER

     The Fed last week kept its key rate in a 0%-0.25% range and said Treasury

and MBS purchases would continue at the current pace or faster in coming months,

with FOMC members seeing no rate increase through at least next year. 

     "We expect to maintain interest rates at this level until we are confident

that the economy has weathered recent events and is on track to achieve our

maximum-employment and price-stability goals," Powell said. He speaks again at

noon Wednesday to the House Financial Services committee.

     Powell noted he's fighting the steepest GDP downturn on record this quarter

and unemployment that's surged 10pp to 13.3%, and "the longer the downturn

lasts, the greater the potential for longer-term damage from permanent job loss

and business closures."

     While some recent indicators suggest the economy is stabilizing or moving

into a modest rebound, Powell said, "until the public is confident that the

disease is contained, a full recovery is unlikely."

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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