Jerome Powell is that Federal Reserve Chairman. On Wednesday, he specifically recommended that Congress should extend unemployment benefits and support local and state governments. Moreover, Powell suggested funneling more help to cash-strapped small businesses.
The central banker has shied away from providing recommendations on what policies Congress should stop support prematurely.
Powell talked to the House Financial Service Committee in a virtual testimony. He said he would think that it would be concerning if Congress were to pull back too fast from the support that it is providing. Moreover, he repeated that both Congress and the Federal Reserve must prepare to do more based on the trajectory of the recovery.
In late March, the CARES (Coronavirus Aid, Relief, and Economic Security) Act passed. With that act, those who were laid off from their jobs amidst the crisis were entitled to receive $600 a week in addition to unemployment insurance. Nevertheless, the additional payment will only last through July.
A Report of jobs in May showed that Americans are going back to work quickly. Nevertheless, not all industries will expect to see rehiring right away. In high services industries like accommodation and food, tourism, and travel, Powell warned that unemployment benefits might be needed past July. This is because unemployment in these areas could persist for a while.
Powell thinks that it is better to keep them in their apartments and keep them paying their bills. He declined to offer recommendations on specific policies.
The Federal Reserve emphasized that more help will need from monetary policy in addition to fiscal policy. Richard Clarida is the Federal Reserve’s Vice Chairman. On Tuesday night, in a speech, he acknowledged that the unprecedented effort of the central bank to ease financial conditions might not prove to be durable. This depends on the course that the coronavirus contagion will take.
Usually, the Federal Reserve chairs are reluctant to offer recommendations on Fiscal policy. This is because of the efforts the central bank takes to insulate its actions from the politics of Capitol Hill.
Nevertheless, during the COVID-19 crisis, Powel gradually offered more commentary on Congressional actions. This is partly because much of the Federal Reserve’s emergency actionsare rooted in the CARES act.
As part of an unprecedented response to backstop a collapsing economy, the Federal Reserve launched eleven liquidity facilities. Those include aid for corporate loans and debt markets to Main Street businesses. The United States Treasury and Federal Reserve appropriated over $200 billion of the $454 billion money pot to those businesses. That happened with the help of the CARES Act.
In May 2019, Powel said in a testimony to the Senate, that they try to stick to their knitting over there.
On Wednesday, the Powell’s tone was markedly different. He expressed concern about the shortfalls of the budget. Those shortfalls are already leading to widespread layoffs in local and state governments. In Aril, 981,000 local and state government jobs were lost.
This is the situation in the United States.