- Various speed bumps risk throwing off the now-steady US economic recovery, Federal Reserve Chair Jerome Powell said on Tuesday.
- While some corners of the economy including the housing market and household spending have rebounded, “great uncertainty” around the virus clouds the path forward, Powell said in remarks prepared for Tuesday morning testimony before the House Financial Services Committee.
- The Fed chair added that lower-wage workers, women, African Americans, and Hispanics bore disproportionate economic pain and face a longer path to full recovery.
- Powell also touched on the Main Street Lending Program. The facility has caught flak for garnering little uptake, and the chairman noted that, since related loans cannot be forgiven, they may not be the best for all businesses.
The US economic recovery is well underway but several hurdles stand to throw it off course, Federal Reserve Chairman Jerome Powell said Tuesday.
Activity “has picked up from its depressed second-quarter level,” the central bank chair said in prepared remarks he’s set to deliver before the House Financial Services Committee on Tuesday. The housing market has fully bounced back, and indicators including household spending have retraced most of their virus-induced losses. The unemployment rate crept lower through the summer as nearly half of the 22 million jobs lost in March and April have been recovered.
Still, the rest of the upswing must contend with economic inequities and the pandemic’s still-murky trajectory. Powell reiterated that Americans hit hardest by the coronavirus and its fallout were those “least able to bear the burden.” The jump in unemployment was disproportionately shouldered by lower-wage workers, women, African Americans, and Hispanics, the Fed chair added.
“This reversal of economic fortune has upended many lives and created great uncertainty about the future,” Powell said.
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The central bank chief’s remarks also addressed rising concerns around the Fed’s Main Street Lending Program. The facility is one of the Fed’s primary programs for aiding struggling businesses, but it’s fallen under scrutiny for seeing little uptake. The program made $600 billion available for emergency loans to small and medium-sized businesses, but about $2 billion have been funded or are in the pipeline, according to Powell.
One reason for businesses’ muted interest could be the program’s inability to dole out grants, the chair said. While loans made through the Paycheck Protection Program could be forgiven under certain circumstances, the Fed is unable to spend government money. The central bank has made adjustments to the Main Street program, but some firms will likely be better off seeking funding elsewhere, Powell said.
“Main Street loans may not be the right solution for some businesses, in part because the CARES Act states clearly that these loans cannot be forgiven,” Powell said. “Many borrowers will benefit from these programs, as will the overall economy, but for others, a loan that could be difficult to repay may not be the answer.”
The Fed chair ended his remarks by repeating a pledge to use the central bank’s “full range of tools to support the economy for as long as is needed.”
Powell will appear with Treasury Secretary Steven Mnuchin to testify before the House committee as part of a quarterly update on the US economic recovery. The hearing is scheduled for 10:30 a.m. ET Tuesday.
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