Fed's Powell to assess next phase of pandemic economy
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[May 13, 2020]
By Howard Schneider
WASHINGTON (Reuters) - Federal Reserve
Chair Jerome Powell, having overseen the rapid creation of the central
bank's massive network of pandemic-era programs, turns his attention
Wednesday morning to where things stand on the cusp of what may be a
risky reopening occurring disparately across the 50 U.S. states.
Powell is scheduled to deliver remarks at 9 a.m. (1300 GMT) in a webcast
event organized by the Peterson Institute for International Economics
and to hold a question and answer session afterwards with the think
tank's director, Adam Posen.
His appearances since the pandemic forced the Fed into a series of
emergency actions starting in March have been aimed largely at
reassuring people that the Fed would use its power to keep their
finances afloat, and to explain the programs it had designed to do so.
His comments on Wednesday come at a different juncture, with an
increasing number of U.S. governors now lifting the various restrictions
on commerce and activity put in place to slow the spread of the
coronavirus, and attention turning to whether that reopening will lead
to a quick return of economic activity or a second wave of infections.
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"The next six to eight weeks will be fundamental" in determining whether
consumers and workers feel safe enough to return to the marketplace, and
if they are able to do so free of disease, Richmond Federal Reserve
President Thomas Barkin said in webcast remarks on Tuesday. “We are at
the brink of...some reemergence of the economy. It is a question of how
do we get the pace up" of the recovery while keeping the health risks
under control.
That has become a centerpiece debate in the United States, pitting the
potentially catastrophic health outcomes should the virus resurge
against the dire economic consequences of tens of millions out of work
and business and family budgets stressed to the point of breaking.
The U.S. economy lost a staggering 20.5 million jobs in April alone and
some 33 million Americans have claimed jobless benefits since late
March, when many state leaders started telling people to stay home to
fight the virus. Some analysts think the economy could shrink by as much
as 40% on an annualized basis in the second quarter.
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![](../images/051320PIX/news_m23.jpg)
U.S. Federal Reserve Chairman Jerome Powell speaks to reporters
after the Federal Reserve cut interest rates in an emergency move
designed to shield the world's largest economy from the impact of
the coronavirus, in Washington, U.S., March 3, 2020. REUTERS/Kevin
Lamarque
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In a Senate hearing on Tuesday, Anthony Fauci, director of the
National Institute of Allergy and Infectious Diseases, spoke of the
risk the country could "paradoxically" end up worse off if it
reopens too haphazardly and ends up with not just new rounds of
infections, but a second wave of restrictions on who can go to work
and what businesses can stay open.
The Fed has put in place a broad set of programs offering trillions
of dollars in credit support to companies, families and financial
markets meant to get the economy through this period, and, more
importantly, to be economically fit enough to participate in what is
hoped to be a strong recovery later this year.
Some of those programs are only just starting to open - the Fed
began purchasing corporate bond exchange traded funds on Tuesday -
and will be rolled out more fully in weeks to come.
There may still be more. The Fed has said it is exploring a possible
program to help non-profits, for example, and it could still make
more explicit promises to buy U.S. government securities in order to
keep long-term borrowing costs low for a longer period of time.
But in coming weeks attention will turn more closely to what happens
as states take the first steps to let diners back into restaurants,
shoppers back into stores, and workers back into factories.
If the state efforts succeed in getting people safely back to work,
the Fed's programs will keep low-cost loans available for people to
buy homes or cars or finance investments.
If they don't and the pace of infections intensifies again, "there
is still a lot of balance sheet capacity at the Fed, there is still
a lot of lending capacity," Barkin said.
(Reporting by Howard Schneider; Editing by Andrea Ricci)
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