From the Wall Street Journal: Federal Reserve Chairman Jerome Powell reiterated Monday that the U.S. economy’s recovery remains far from complete despite recent improvement and that the central bank plans to continue providing support.
“The recovery has progressed more quickly than generally expected and looks to be strengthening,” Mr. Powell said in testimony prepared for delivery Tuesday in a hearing before the House Financial Services Committee. “But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”
The Fed has held its benchmark interest rate near zero since the effects of the Covid-19 pandemic slammed the U.S. economy a year ago. Most central bank officials don’t expect to raise the rate until 2024 at the earliest. The Fed also plans to continue purchasing at least $120 billion a month of Treasury debt and mortgage-backed securities until the economic recovery makes “substantial further progress.”
A major federal relief package passed last year requires the heads of the Fed and Treasury Department to testify before Congress every quarter on their efforts to support the U.S. economy during the pandemic. After Tuesday’s hearing in the House, Mr. Powell and Treasury Secretary Janet Yellen are set to appear Wednesday before the Senate Banking Committee.
The package, known as the Cares Act, provided the Treasury Department $454 billion with which
to backstop extraordinary lending programs by the Fed. Mr. Powell said Monday that the facilities had helped unlock almost $2 trillion in credit to support businesses, cities and states.
Then-Treasury Secretary Steven Mnuchin decided Nov. 19 to let five of the special programs—including one that lent directly to midsize companies and another that bought local-government debt—expire at the end of 2020. That opened up a rare public rift between the Fed and Treasury and triggered a partisan fight over whether the Biden administration should have access to the money.
Since then, however, Congress has approved nearly $3 trillion in fiscal support for the economy. Fed officials and private economists expect the stimulus measures, combined with a relaxing of pandemic-related restrictions as vaccination progress continues, will power the strongest economic growth the U.S. has seen since the early 1980s.
Mr. Powell has said repeatedly in recent weeks that the Fed is in no hurry to change its easy-money policies until its forecasts materialize in the form of higher inflation and a strong labor market.