“We have entered a very important new phase and we did it ahead of schedule,” Federal Reserve Chairman Jerome Powell told the Lower House Financial Services Committee during a hearing to discuss the implementation of the large program of financial aid for the crisis approved in late March.
In his testimony Powell highlighted that containing the virus and restoring confidence are the keys to the recovery of the economy, along with the implementation of policies at all levels of government to “give relief and a prop to the economy as long as it is necessary” .
“A full recovery is unlikely until people feel it is safe to return to a wide range of activities,” he warned at a time when the western and southern United States are experiencing an increase in coronavirus cases.
Despite the magnitude of the shock, which the International Monetary Fund predicts will cause an 8% contraction in the US economy, there are some encouraging signs, including a drop in unemployment in May, a rebound in retail sales and consumer spending. .
Added to these indicators is the improvement in consumer confidence in May and June, despite the fact that according to data on weekly subsidies, the layoffs caused by the pandemic persist, with close to 1.48 million new requests for help due to unemployment last week.
A “targeted” help
Congress adopted a massive $ 2 trillion emergency aid plan in late March, called the CARES Act, aimed at mitigating the impact of the crisis on America’s most vulnerable companies and workers.
The House of Representatives adopted a gigantic $ 3 trillion aid plan in May, but Republicans with a majority in the Senate are calling for changes before revising it.
Treasury Secretary Steve Mnuchin told lawmakers on his side that the “tremendous amount of funds” already approved by Congress is helping to shore up the economy, which should improve in the second half of the year.
Mnuchin noted that the data shows that this aid has encouraged recovery and that 2.5 million jobs were created in May.
“Although the unemployment rate is still at a historically high level, we are seeing further indications that conditions are going to improve significantly in the third or fourth quarter of this year,” he added.
The official said he is going to start talks for an additional aid plan.
“We look forward to working with Congress bipartisanly in July for any other legislation that is necessary,” he added.
But he added that any additional aid should be “directed towards certain industries that have been especially affected by the pandemic, with an emphasis on employment.”
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