Green shoots welcome but recovery still a long road, Fed's Powell says
By Lindsay Dunsmuir WASHINGTON (Reuters) - A full U.S. economic recovery will not occur until the American people are sure that the novel coronavirus epidemic has been brought under control, Federal Reserve Chair Jerome Powell said on Tuesday, as he began the first of two days of hearings before U.S.
By Lindsay Dunsmuir
WASHINGTON (Reuters) - A full U.S. economic recovery will not occur until the American people are sure that the novel coronavirus epidemic has been brought under control, Federal Reserve Chair Jerome Powell said on Tuesday, as he began the first of two days of hearings before U.S. lawmakers.
While recent signs of improvement including a surprise gain in employment and a record rise in retail sales last month are encouraging, the damage inflicted by forced shutdowns of activity to contain the spread of the virus starting in March has left a very deep hole to fill, especially on the employment front, Powell said.
"Something like close to 25 million people have been displaced in the workforce, either partially or through unemployment and so we have a long road ahead of us to get those people back to work," Powell said in response to a question from a member of the Senate Banking Committee.
Powell's prepared remarks to the committee largely echoed the cautionary tone he struck last week at the conclusion of the Fed's latest two-day policy meeting, mapping out how the United States faces an uncertain, uneven and prolonged economic recovery from the novel coronavirus crisis.
The Fed kept interest rates unchanged near zero and made clear it plans years of extraordinary stimulus as the nation grapples with steps toward fully reopening its economy amid state and local surges in cases, and with no vaccine in sight.
"The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures," Powell said in his opening statement, a theme he returned to in his answers to committee members' questions.
"As I mentioned earlier there's a broad expectation that we'll see big numbers of people coming back this summer, and we certainly hope that turns out to be right. But also, those people who work in those service industries that are going to take longer to recover, there will be a lot of them, and they'll find it hard to get back to work as quickly as the others."
Congress has so far allocated nearly $3 trillion in financial relief, including direct payments to households and a forgivable loan scheme for small businesses, while the Fed has implemented numerous programs to pump trillions of dollars of credit into the economy.
On Monday, the Fed launched its long-awaited Main Street lending program, which will offer up to $600 billion in loans to U.S. businesses with up to 15,000 employees or with revenues up to $5 billion.
But as Powell reiterated on Tuesday, there will be no quick fix to healing the economy and he repeated that the Fed will use its full range of tools to help it recover. He also said that direct financial support to families and businesses makes "a critical difference" in limiting long-lasting damage.
Powell and other Fed officials have increasingly said Congress may need to do more to prevent long-term economic scarring and the Fed warned in its semi-annual report to lawmakers on Friday that it expects households and businesses to suffer "persistent fragilities."
Millions of people have become unemployed as a result of the epidemic, which has killed more than 116,000 people in the United States, with minority communities among those hardest hit on both fronts.
"If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing," Powell, who will also appear before the House Financial Services Committee on Wednesday at 12 p.m. EDT (1600 GMT), said in his prepared remarks.
Fed officials currently forecast the economy shrinking at a 6.5% annualized rate in 2020 and see unemployment remaining elevated for several years. Powell has previously said he sees millions, particularly low-wage workers, remaining out of work for the foreseeable future with no easy re-entry into employment.
(Reporting by Lindsay Dunsmuir; Editing by Jonathan Oatis and Andrea Ricci)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.