Federal Reserve's Powell calls for government action to prevent long-term scarring
The head of America's central bank said that further fiscal support for the economy may be needed in order to avoid the long-term scarring that a recession as deep as the current one may leave on the economic fabric of the country.
In remarks prepared for a speech at the Petersen Institute for International Economics, Jerome Powell highlighted the hit to lower income families, among whom roughly two fifths of households with annual earnings of less than $40,000 had lost their wage earner.
The results of a Federal Reserve survey on the matter were due to be published the next day.
During his webcast remarks, Powell also called attention to the toll that the pandemic would take on America's small and medium-sized enterprises and the impossibility at times of undoing damage to a lifetime's or generations of work to build them.
Against that backdrop, Powell said that more government spending may be needed, but was careful to emphasise that was the remit of elected officials.
He also said now was not the moment to prioritise putting the federal government's debt pile on a declining trend.
"Long stretches of unemployment can damage or end workers' careers as their skills lose value and professional networks dry up, and leave families in greater debt," he said.
"The loss of thousands of small- and medium-sized businesses across the country would destroy the life's work and family legacy of many business and community leaders and limit the strength of the recovery when it comes."
Powell also called attention to the wide range of possible outcomes for the economy as well as the difficulty of predicting which were the most likely, describing the path ahead as "both highly uncertain and subject to significant downside risks".
"How quickly and sustainably will it be brought under control? Can new outbreaks be avoided as social-distancing measures lapse? How long will it take for confidence to return and normal spending to resume? And what will be the scope and timing of new therapies, testing, or a vaccine?
"[...] Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.
"We ought to do what we can to avoid these outcomes, and that may require additional policy measures."