(Reuters) – U.S. Federal Reserve Chair Jerome Powell on Tuesday makes the first of three appearances on Capitol Hill this week to address lawmakers’ questions and concerns about the raft of emergency measures the central bank has taken to blunt the hit to the economy delivered by the coronavirus pandemic.
Powell – who will be joined by Treasury Secretary Steven Mnuchin on Tuesday and again Thursday – is likely to get an earful from lawmakers concerned that there has been limited uptake so far on some of the programs designed to help small businesses and that other Fed actions have ignited a stock market rally that has exacerbated economic inequality.
Tuesday’s hearing – six weeks before a presidential election for which the pandemic and the government’s response to it is a central issue – is before the House Financial Services Committee chaired by Democrat Maxine Waters of California.
“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,” Powell will tell the panel, according to the text of his remarks released on Monday.
The pandemic dealt a death blow to the longest-ever U.S. economic expansion in the first quarter when widespread business shutdowns and stay-at-home orders triggered the largest drop in activity since at least World War Two. The Fed responded by cutting interest rates to near zero, ramping up bond purchases and launched nearly a dozen emergency credit facilities, several with backing from the U.S. Treasury.
The economy has made “marked improvement” since the depths of the crisis, Powell said in his prepared remarks.
“Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain,” Powell said in the prepared remarks. “The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.”
In all, Powell said, the Fed has “helped unlock” $1 trillion of funding to keep businesses from shutting so that they can more easily rehire workers when the economy picks up. But less than that has actually made it out the door.
The Fed’s $600 billion Main Street Lending program has so far lent or is in the process of lending $2 billion to businesses that cannot otherwise obtain credit. Critics say the Fed and Treasury should loosen terms so more borrowers can tap in to the funds.
Nearly 30 million people across the country continue to draw weekly state unemployment benefits. Congress is at an impasse on negotiations over additional support for out-of-work Americans after a $600-a-week federal supplement to jobless aid expired over the summer.
Powell has said that additional federal stimulus is likely to be needed, though White House economic adviser Larry Kudlow says the recovery is “self-sustaining” without it.
The Fed recently changed its operating framework and last week pledged not to raise rates until it judges the economy has attained full employment and its preferred measure of inflation has hit its target of a 2% annual rate and is on track to exceed that modestly for some time.
Powell on Wednesday faces the House Select Subcommittee on the Coronavirus Crisis chaired by Democrat Jim Clyburn of South Carolina, and finally the Senate Banking Committee chaired by Republican Mike Crapo of Idaho on Thursday, when he will be joined again by Mnuchin.
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