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Federal Reserve Chairman Jerome Powell on Thursday said he thinks the economy can snap back once the coronavirus pandemic eases and Americans get back to work.
“There is every reason to believe that the economic rebound, when it comes, can be robust,” Powell said, in a webcast speech to the Brookings Institution.
“We entered this turbulent period on a strong economic footing and that should help support the recovery,” he added.
The Fed’s staff worried that any meaningful recovery might not start until 2021, according to minutes of the Fed’s mid-March policy meeting. But the Fed chairman sounded more optimistic.
Over the last month the Fed has slashed its benchmark interest rate back down close to zero, begun buying Treasurys and mortgage debt and started setting up a dizzying array of lending programs to keep all corners of the financial markets operating.
Powell said the programs put in place are working and “market conditions have generally improved.”
Earlier Thursday, the Fed took additional actions to provide $2.3 trillion in loans to support the economy, including a “Main Street” loan program to mid-sized companies and supports to states and cities.
Read: Fed announces new lending plans to support economy
Powell said these programs would help build a bridge from the solid pre-cornavirus period to “a position of regained economic strength on the other side.” The high rate of unemployment will be temporary, he added.
Economists note the Fed can’t stop the economy from slowing sharply as the economy shuts down to avoid the spread of the virus.
Initial claims for state unemployment insurance soared again this week, with layoffs swelling to nearly 17 million since mid-March. Economists are forecasting a sharp contraction in GDP growth in the April-June quarter.
instead, the Fed programs are designed to blunt the damage caused to households, businesses, and financial markets.
Powell stressed that the Fed is using lending powers, not sending grants out to beneficiaries.
“We will continue to use these powers forcefully, proactively and aggressively until we are confident that we are solidly on the road to recovery,” the Fed chairman said.
U.S. equity benchmarks opened higher on Thursday with the Dow Jones Industrial Average DJIA, +2.08% up almost 300 points in early trading.
