By Steven K. Beckner
(MaceNews) – Federal Reserve Chairman Jerome Powell warned of the continued economic risks posed by the mutating Covid virus Tuesday.
And Powell stressed that the economy remains far from completing recovery from the initial outbreak of the pandemic and from achieving the “maximum employment” aspect of the Fed’s dual mandate.
The Fed chief, answering questions from students and teachers participating in a Web-based Town Hall, did not directly address pressing monetary policy issues, namely when the Fed’s policymaking Federal Open Market Committee will begin scaling back its asset purchases. But his comments seemed to suggest that he is still in no hurry to start “tapering” the Fed’s $120 billion per month bond buying program.
Unprompted, Powell repeatedly stressed that the economy still has a long ways to go to full recovery and full employment.
Speaking of the “slower” pace of job recovery in some areas of the economy, he said, “We’re way below the levels of employment that we were in early 2020.”
“It’s important we continue to support those people…who want to work,” he said. “That part of the recovery that is far from complete.”
Powell also emphasized the economy’s continued vulnerability to the pandemic.
Talking about the Fed’s efforts to help the economy bounce back from the depths of the Covid-induced recession, he said, “We’ve learned a whole lot about how to deal with it and how not to deal with it.’
But “We’re not through it this time,” he continued. “The Covid pandemic is still casting a shadow on economic activity.”
“We’re still with it,” Powell went on. “We can’t declare victory on it.”
Looking ahead, he said the Fed “must do everything we can to avoid financial crises and pandemics.”
Powell said the steps the Fed took in the wake of the 2008 financial crisis – increasing capital and liquidity requirements, introducing bank stress tests and so forth – left the financial system in good shape to weather the pandemic crisis.
But the Fed still had to ride to the rescue. “We acted very quickly, very aggressively” by cutting interest rates to near zero and introducing special credit programs to stabilize financial markets, provide emergency credit and restore market functioning.
“As the emergency receded, we were required to put those tools away,” he noted. “We’re in the process of putting those tools away.”
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Contact this reporter: steve@macenews.com.
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