MNI POLICY: Powell Says Grim Recovery May Need More Action

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Chair Jay Powell said Wednesday that

additional fiscal and monetary actions may be required to curb the risk of a

prolonged recession and damage to the economy's capacity "for years to come." 

     Long stretches of unemployment, the loss small- and medium-sized businesses

and decreased investment as a result of a longer fight against Covid-19 could

result in "an extended period of low productivity growth and stagnant incomes,"

he warned. 

     The Fed's emergency loans can provide "a bridge across temporary

interruptions to liquidity," and "we will continue to use our tools to their

fullest until the crisis has passed and the economic recovery is well under

way," Powell said, but only lawmakers can make more grants. 

     "Additional fiscal support could be costly, but worth it if it helps avoid

long-term economic damage and leaves us with a stronger recovery. This tradeoff

is one for our elected representatives, who wield powers of taxation and

spending," Powell said. 

     --'RANGE OF POSSIBLE OUTCOMES'

     The economy's path "is both highly uncertain and subject to significant

downside risks," Powell said. "Policies will need to be ready to address a range

of possible outcomes."

     The Fed's response so far has "provided a measure of relief and stability,"

but the long term concerns are those that may require additional policy

measures, he said. 

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

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