Jerome Powell, Chairman of Federal Reserve

Coronavirus surge, restrictions dent US economic recovery, says Fed Chief

*Apparent pullback by consumers, slowdown in rehiring of furloughed workers are indicators, says Jerome Powell, Chairman of Federal Reserve

*Path of economy will depend significantly on course of virus ─Federal Open Market Committee

Isola Moses | ConsumerConnect

The recent surge in novel Coronavirus disease (COVID-19) cases and subsequent restrictions across several states in the United States (US), originally aimed at containing the pandemic, have begun to weigh on the much expected economic recovery of the world’s largest economy.

Jerome Powell, Chairman of Federal Reserve, disclosed this at a recent news videoconference, following release of the US Central Bank’s latest policy statement, says agency report.

The Fed Chief referenced an apparent pullback by consumers and a slowdown in the rehiring of furloughed workers, particularly by small businesses as pointed indicators in this regard.

“We have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity,” Powell said.

He declared that the United States “has entered a new phase in containing the virus, which is essential to protect both our health and our economy.”

Report indicates that Powell’s latest comments confirmed what many economists and other analysts have maintained in recent weeks as Coronavirus infections exploded in a number of southern and southwestern states, dimming hopes for a quick economic rebound.

The Fed’s policy statement Wednesday, July 29 directly tied the economic recovery to resolution of a health crisis whose direction remains much in doubt.

More than 150,000 Americans have died from COVID-19, the respiratory illness caused by the novel Coronavirus, report stated.

“The path of the economy will depend significantly on the course of the virus,” the central bank’s policy-setting Federal Open Market Committee (FOMC) said.

In his news conference, Powell elaborated on just how much remained unclear about the direction of the world’s largest economy, according to report.

Fiscal programmes that he credits with sustaining consumer spending in recent weeks are about to expire, with debate still underway in Congress over what, if anything, will take their place.

The virus is moving so fast that policymakers are taking cues about the economy from real-time flows of data from firms that track people’s movements through cellphones, for example, or provide signals about hiring, said Powell.

He stated: “That data show that on balance … the pace of the recovery looks like it has slowed since cases began that spike.”

Meanwhile, Fed policymakers have repeated a pledge to use their “full range of tools” to support the economy and keep interest rates near zero for as long as it takes to recover from the fallout from the epidemic, saying the economic path will depend significantly on the course of the virus.

“Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year,” the Fed said in its statement.

All FOMC members voted to leave the target range for short-term interest rates at between 0% and 0.25%, where it has been since March 15 when the virus was beginning to hit the nation.

It said: “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

US stocks added to gains after the Fed’s statement, while longer-term U.S. Treasury yields moved slightly higher. The Dollar fell to a two-year low against a basket of said Nela Richardson, investment strategist at Edward Jones in St. Louis, said: “The most notable thing is the statement that the path of the economy will depend on COVID-19.

“The Fed is putting health again front and center in its statement, which is impactful and meaningful.

Richardson stated that “it’s a bit ominous, to be frank. We know that this virus is unpredictable.

“That sentence shows the primacy of COVID-19 in their outlook and the uncertainty of their outlook because of it.”

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