Jerome Powell Expects Difficult Months for the US Economy Due to COVID Rebound

Fed chairman, Jerome Powell,  made a prepared speech for his Senate hearing. He stated that the increase in COVID-19 cases was concerning and could have problematic consequences in the coming months. 

According to Powell, recent news on the vaccine front is very positive in the medium term. However, significant challenges and uncertainties remain, including timing, production, and distribution of vaccines.

Furthermore, it remains challenging to assess the magnitude of the economic impact with any degree of confidence.

Treasury Secretary Steven Mnuchin defended the government’s measures underlining the historic growth recorded in the third quarter.

He stated that Americans were returning to work. The October employment report shows that the economy recovered 12.1 million jobs compared to all jobs lost due to the pandemic.

The private services sector, which includes the industries most affected by the measures taken to contain the coronavirus, recovered 58% of the jobs lost.

In late March, the US government adopted a gigantic aid plan for about $2.2 trillion. It helped cushion the impact of the pandemic. 

However, the resurgence of the virus, which was accompanied by new and drastic measures, hindered the progress recorded in the third quarter and seriously affected US companies and workers.

Negotiations in Congress to reach a plan to relaunch the economy have been bogged down for months. 

Republican and Democratic Senate leaders Mitch McConnell and Chuck Schumer called on Monday for further action before the end of the year. But, they also blamed each other for the lack of agreement.

A special aid package

Mnuchin, in turn, urged Congress to use $455 billion in remaining emergency aid funds to push for a new round of targeted economic assistance measures for households and businesses.

He believes that based on recent economic data, a specific budget package is the most appropriate federal response. 

The hearings will take place after the Fed announced the extension of the business credit lines launched in March. They will be prolonged for three months, until March 31, 2021, to cushion the economic consequences caused by the pandemic. 

The decision received the approval of the Treasury. Nevertheless, the decision indicated last week that these emergency programs should end as planned on December 31. Despite protests from the Federal Reserve. 

The Trump administration had asked the Federal Reserve to return the $455 billion in unspent funds under these programs, a decision heavily criticized by economists and politicians alike.