'Uncertainty' Clouding US Recovery, Fed Chief Warns

A full US 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 US lawmakers.

"Until the public is confident that the disease is contained, a full recovery is unlikely," Powell said in prepared testimony to the Senate Banking Committee as he mapped out how the United States faces an uncertain, uneven and prolonged economic recovery from the novel coronavirus crisis.

The Fed last week 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.

Congress has so far allocated nearly US$3 trillion in financial relief, including direct payments to households and a forgiveable 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 programme, which will offer up to US$600 billion in loans to US businesses with up to 15,000 employees or with revenues up to US$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". (Reuters)