Fed’s Powell Says US Economy Could Return To Pre-Crisis Levels ‘Much Sooner’ Than Expected

Federal Reserve Chairman Jerome Powell said on Thursday that the US economy could return to pre-coronavirus pandemic levels “quite soon” thanks to a torrent of monetary and fiscal assistance during the year elapsed.

The nearly $ 4 trillion in direct fiscal stimulus approved by Congress and the Trump administration – including the March $ 2.2 trillion CARES bill and the $ 900 billion relief bill passed in December – have played a critical role in avoiding deeper economic damage, Powell said.

While stressing that the economy will not recover completely until the pandemic is under control, the head of the central bank said he was “optimistic” about the prospects for the “next two years”.

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“You’re in a situation where we could be back to the old economic peak pretty quickly, and get past it,” Powell said during a virtual webcast with Princeton University. “We can avoid much of the damage we were concerned about for low- and middle-income people, who incidentally still have very high unemployment, but with the reopening of the service economy later this year, we hope to come back there. “

In just two months, the coronavirus pandemic and the economic shutdown it triggered wiped out more than 20 million jobs, a rate not seen since the Great Depression. Before the onset of the crisis, unemployment was at its lowest level in half a century.

So far, the U.S. economy has recovered about half of the jobs lost, with about 9.8 million more Americans unemployed now than compared to February. The unemployment rate is 6.7%.

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The epidemic has also been a catalyst for bankruptcies among small and large businesses, and caused an unprecedented 33.3% contraction of the country’s GDP in the second quarter.

The Fed has responded to the pandemic by taking a series of extraordinary measures to support the economy, including lowering interest rates to near zero, buying an unlimited number of Treasuries (a practice known as (quantitative easing) and launching crisis lending facilities to ensure credit goes to households and businesses.

“The thing we’re focusing on the most is getting back to a strong job market fast enough that people’s lives can get back to where they want to be,” said Powell. “We were in a good position in February 2020, and we think we can go back, I would say, much sooner than we had feared.

More help could be on the way: President-elect Joe Biden is set to unveil his long-awaited coronavirus revival proposal on Thursday night amid new evidence that a surge in COVID-19 cases across the country is derailing the recovery of the country.

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The plan, which could cost at least $ 1.5 trillion, is typically expected to include a commitment for 1,400 stimulus checks, an extension of additional unemployment benefits that are set to expire in March, funding for the distribution of vaccines and aid for state and local governments. The $ 1,400 payments would be on top of the $ 600 most Americans received this month, bringing the total amount of the check to $ 2,000.