Federal Reserve Chairman Jerome Powell warned that the coronavirus crisis could leave “lasting damage” to the economy and predicted a recovery could stretch into 2021.
“This economy will recover; it may take a while,” he told 60 Minutes. “It may take a period of time, it could stretch through the end of next year, we really don't know.”
“Assuming that there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year,” he added “For the economy to fully recover, people will have to be fully confident, and that may have to await the arrival of a vaccine.”
Powell says health safety is most important:
Though President Donald Trump has pushed the economy over public safety in his speeches, Powell said that the health metrics will ultimately determine the fate of the economy.
“The thing that matters more than anything else is the medical metrics, frankly. It's the spread of the virus,” he said. “The real-time economic data that we're seeing is just a function of how successful the social distancing measures are. So, the data we'll see for this quarter, which ends in June, will be very, very bad. There'll be a, you know, big decline in economic activity, big increase in unemployment. So what we're really looking at is getting the medical data, which is not what we usually look at, taken care of so that the economic data can start to recover.”
Powell warns of lasting damage:
Powell said that the economic crisis could stretch well beyond the recovery.
“There's a real risk that if people are out of work for long periods of time, that their skills atrophy a little bit and they lose contact with the workforce. Longer and deeper recessions tend to leave behind damage to people's careers,” he said.
Powell praised Congress for acting quickly but said that there is more that the Fed could do to help.
“Well, there is a lot more we can do. We're not out of ammunition by a long shot,” he said. “No, there's, there's really no limit to what we can do with these lending programs that we have.”