U.S. Federal Reserve Chairman Jerome Powell said Tuesday fiscal stimulus has helped support the economic recovery from the COVID-19 induced recession, noting that the recovery will go faster if there is further fiscal stimulus.
“Many economic indicators show marked improvement. Household spending looks to have recovered about three-fourths of its earlier decline, likely owing in part to federal stimulus payments and expanded unemployment benefits,” Powell said in his testimony at a hearing before the House Financial Services Committee.
The Fed chairman was referring to the CARES Act, a 2-trillion-dollar relief package approved by Congress in late March, which provided small businesses emergency loans, extra 600-dollar weekly unemployment benefits, 1,000-dollar-plus direct payments for working Americans, among others.
The 600-dollar benefits expired at the end of July, but lawmakers remain deadlocked over the next round of COVID-19 relief bill.
Powell said both employment and overall economic activity remain well below their pre-pandemic levels, noting that the country still has 11 million unemployed, out of the 22 million who were laid off in March and April amid COVID-19 shutdowns.
The Fed chair stressed that the path ahead continues to be highly uncertain. “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” he said.
The central bank chief, who has refrained from advising Congress on specific fiscal policy, said economic recovery will go faster if monetary policy and fiscal policy could go hand in hand to help those in need.
“The details of that (fiscal response) are between Congress and the administration, not for the Fed to say, but I do think that the recovery will go faster if we have both tools continuing to work together as they have so far,” Powell said.
U.S. Treasury Secretary Steven Mnuchin, who also testified at the hearing, said the administration continues to try to work with Congress and is ready to reach a bipartisan COVID-19 relief agreement.
Mnuchin said economic recovery has been strong because the administration and Congress worked together on a bipartisan basis to deliver the largest economic relief package in American history, adding that the Fed has also been instrumental to the recovery by implementing various lending facilities.
The Fed has taken forceful action to support the COVID-19-ravaged economy, implementing a policy of near-zero rates, increasing asset holdings, and standing up 13 emergency lending facilities, according to Powell.
Since mid-March, the Fed has helped unlock more than 1 trillion dollars of funding, which has helped keep organizations from shuttering, putting them in a better position to keep workers on and to hire them back as the economy continues to recover, Powell said.
“We remain committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy,” he said.