Fed's Powell remains confident on 'full' economic recovery, given time
By Alexander Bueso
Date: Tuesday 16 Jun 2020
(Sharecast News) - The head of the US central bank sounded a confident note on the outlook for a "full" recovery in the US economy over the long-term but conceded that uncertainty remained very high and that such a rebound would take time.
He also provided further details on the Federal Reserve's corporate bond buying programme announced a day earlier, prompting a small move lower in equity markets.
Jerome Powell explained that the Fed was simply following through on a previously made commitment and that the pace of purchases of individual companies' debt as opposed to just through exchange-traded-funds would depend on the how well markets functioned.
If market functioning continued to improve then the Fed would be happy to slow or halt such purchases.
Powell was delivering his semi-annual testimony before the US Senate's committee on Banking, Housing, and Urban Affairs on Tuesday.
The Fed chief also demured from committing to open-ended purchases and indicated that buying would only take place in the secondary market.
Regarding the current crisis, Powell emphasised that it was first and foremost a healthcare crisis and highlighted how nearly 20.0m jobs had already been lost since February.
Hence, despite the bumper May jobs report, the drop in gross domestic product during the second quarter was expected to be the most severe on record, while output and employment remained "far below" their pre-pandemic level.
"Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely," he told Senators.
"We are committed to using our full range of tools to support the economy in this challenging time."
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