The U.S. economy will recover more quickly from the coronavirus crisis, with fiscal and monetary stimulus measures running simultaneously, Federal Reserve Chairman Jerome Powell said at the House of Representatives Financial Services Committee, where he speaks with Treasury Secretary Stephen Mnuchin. …
“The future prospects for the economy depend on how the coronavirus is controlled, as well as on the actions taken at all levels of government,” Powell said. According to him, the recovery of the American economy is already underway, however, “both employment and economic activity in general remain significantly below the levels observed before the pandemic, and high uncertainty about the future prospects remains.”
Answering questions from lawmakers, Powell noted that the improvement in the US economy after the crisis caused by the COVID-19 pandemic was largely due to fiscal stimulus. Over time, the economy will begin to feel the negative consequences of the completion of budget aid programs, he said.
Powell added, however, that most experts still expect legislators to adopt a new package of measures to support the American economy in the coming months.
Mnuchin, meanwhile, said that both he and US President Donald Trump will continue to seek opportunities for an agreement between Democrats and Republicans in Congress on the next stimulus package. “The President and I are committed to providing further assistance to American workers and businesses,” Mnuchin said. “I am confident that targeted assistance is needed, and the presidential administration is ready for an agreement.”
Powell expressed confidence that the US economy will be able to fully recover from “this difficult period.” “We remain committed to using our full range of instruments to support the economy as long as needed,” Powell said. In response to questions about the Fed's programs, Powell noted that subsidies to help small and medium-sized businesses work better than loans.
The Fed has been criticized for weak interest in the Main Street Lending (MSL) program, under which the central bank has pledged to spend up to $ 600 billion to buy back loans issued by banks to small and medium-sized businesses. As of September 16, the Federal Reserve has bought back loans in the amount of only $ 1.5 billion under MSL, Bloomberg writes.
“For some businesses, MSL loans may not be the best solution,” Powell said. So, according to him, the demand for loans less than $ 1 million under this program is low. Powell also noted that the US banking sector is holding up well during the coronavirus pandemic.
Mnuchin, answering questions from lawmakers, said that the Treasury is inclined to give state and city authorities more flexibility in terms of spending funds allocated in accordance with the bill “On economic security and emergency assistance in combating coronavirus” (Coronavirus Aid, Relief and Economic Security, CARES Act), adopted in March this year. He expects that by the end of this year, 150 million tests will be available in the United States to instantly detect the incidence of COVID-19.