Falls on Wall Street after the President of the Federal Reserve predicts a slower recovery than expected | Economy

The nearly three trillion dollars that the United States Congress has allocated to mitigate the effects on the economy of the coronavirus pandemic will not be enough. This has been warned by Jerome Powell, president of the Federal Reserve, who has assured that “more fiscal support will be needed” to overcome a crisis from which the country will take longer to recover than initially estimated. Powell’s words have sparked investor concern: Wall Street’s leading indices closed the day with declines. The Dow Jones fell 2.1% and the S&P lost 1.6%, in a sign that confidence is beginning to subside in an early recovery in the economy, which had produced increases in the markets that did not correspond with the bad indicators in the real economy that have happened in recent weeks.

“There is a growing feeling that recovery may be slower than we would like, but it will come,” Powell said, during a virtual presentation organized by the Peterson Institute for International Economics. “That means legislators will have to do more.”

Since the beginning of the crisis just two months ago, Congress has already allocated significant aid, worth 14% of the country’s Gross Domestic Product, to households, companies and public administrations. It is, Powell recalled, “the largest and fastest approved response to any post-war recession.” “But as big as it is, it won’t be the last chapter,” he warned.

“We are witnessing a serious drop in economic activity and employment, and almost all the gains in the labor market in the past decade have disappeared,” said Powell. The unemployment rate in the United States, which stood at 3.5% in February, the lowest in 50 years, reached 14.7% in April, the highest value since the Great Depression of the 1930s of the last century.

The path ahead, according to the central bank governor, “is highly uncertain and subject to significant risks.” Powell has acknowledged that redoubling fiscal support can be costly in these circumstances, but in the long run the benefits, he noted, “will also be substantial.” “It will be worth it if it helps prevent long-term economic damage and leaves us with a stronger recovery,” he said.

The Federal Reserve responded aggressively to the first steps of the crisis. It cut the interest rate to between 0% and 0.25%, launched a debt purchase plan worth more than two trillion dollars, and even announced the granting of emergency loans, backed by the Treasury. But Powell has reiterated that the Fed is not planning to hit negative rates. “The view on negative rates has not changed, it is not something we are considering,” he concluded.

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