The Federal Reserve The United States does not usually tell Congress or the White House what they should do, but now, before the unprecedented brutality of the crisis created by the coronavirusJerome Powell has broken the habit. In a speech on Wednesday, the Fed president has urged the legislature and the executive to give the green light to more injections of money to prevent the economic and labor damage of the pandemic from becoming permanent.
The panorama that has portrayed Powell in a virtual act of the Peterson Institute for International Economics is bleak. You talked about a crisis whose “reach and speed is unprecedented modern & rdquor; and it is “significantly worse than any recession since WWII& rdquor ;. He recalled that “the gains in the labor market of the last decade have been erased & rdquor ;, ensuring that” the setback in economic fortune has caused a level of suffering that is difficult to capture in words& rdquor ;. And one day before the Fed releases a detailed report on the impact of this crisis, it has underlined that The most disadvantaged are carrying the most weight, upfront that that analysis will show that almost the 40% of those who lost their jobs in March they are workers of households with less than $ 40,000 a year in income.
April employment data showed an unprecedented loss of 20 million jobs in one month. The unemployment rate shot up to 14.7%. And heatinos and blacks, as well as the women, suffered the greatest blows.
More encouragement “would be worth it & rdquor;
Powell has applauded aid packages approved so far by Congress and signed by the President. Donald trump, who have injected almost three trillion dollars into private pockets, the medical system and the general economy, but have made it clear that they may be insufficient. “Although the economic response has been appropriately large and timely, it may not be the last chapter, given that the path ahead is highly uncertain and is subject to significant fall risks& rdquor ;, he said.
On alert for a crisis of Domino effectPowell has warned that if it is prolonged it can create “lasting damage& rdquor; to the productive capacity or “avoidable insolvencies & rdquor; both in homes and businesses that would hinder growth for years. And against this background, he has defended new injections of aid. “The Additional tax support could be expensive, but it would be worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery & rdquor ;, you have assured.
Political blockade
The Democrats have put on the table a new stimulus package, $ 3 trillion more in new aid to workers and also to states and municipalities, which could be voted this Friday in the Lower House, where they have a majority. There is, however, Scant prospects for the proposal to get the green light in the Senate, controlled by the republicans.
Between the conservatives and in the White House there is more concern about a deficit It is estimated that it could climb this year to four trillion dollars and it is opted for the moment to continue defending the country’s exit from the confinement and closure measures, despite the reluctance of the health authorities for the rush, hoping that the economy will be reactivated in this way.
Slower recovery
The bags have received with falls honesty about the seriousness of Powell’s situation, who has also warned that although it may be close to the economy hitting its lowest point soon and starting to recover, “there is a growing feeling That the Recovery can come slower than we would like& rdquor ;.
Also the Fed president has insisted that at least for now the agency continues rejecting lower rates from the current 0-0.25% range where you left them in March to negative rates, something that would happen for the first time in history. For now, it will continue to choose other tools, including traditional ones such as the purchase of more than two trillion dollars in mortgage bonds and assets and others with which it is reinventing itself, such as injections of aid to small and medium businesses and states which will soon be launched.
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