Washington, May 19 (efe-epa).- The chairman of the United States Federal Reserve on Tuesday urged Congress to do all it can to alleviate the economic impact of the coronavirus-triggered lockdowns, making those remarks at a time when legislators are negotiating a new fiscal stimulus package.
“It is worth remembering that the measures taken to contain the virus represent an investment in our individual and collective health. As a society, we should do everything we can to provide relief to those who are suffering for the public good,” Jerome Powell said in a virtual appearance before the Senate Committee on Banking, Housing and Urban Affairs.
He added that on the monetary side the Fed “is committed to using (its) full range of tools to support the economy in this challenging time” having already taken steps that include injecting massive liquidity into financial markets, making large-scale purchases of Treasuries and agency mortgage-backed securities and lowering its benchmark interest rate to practically zero.
Powell, however, said those actions are “only part of a broader public-sector response.”
The Fed chairman has not been receptive to calls by US President Donald Trump and others for the central bank to lower its federal-funds rate into negative territory, which in practice would mean that banks would have to pay to park their excess cash at the central bank and therefore be encouraged to lend those funds out instead.
The Fed has long maintained that monetary tool would not be effective for the US, and last Wednesday Powell said such a move is not under consideration.
The Democratic-controlled House of Representatives last Friday passed a new $3 trillion coronavirus relief package that, if approved by the GOP-controlled Senate and signed into law by Trump, would more than double the amount of stimulus already approved by Congress.
That bill would provide $1 trillion in relief to state and local governments hard hit by the Covid-19 crisis, as well as a new round of stimulus checks to ordinary Americans.
But the White House and Republican lawmakers – and even some Democrats – have expressed opposition to some measures in the bill such as stimulus checks for undocumented migrants. The GOP also wants to make sure that coronavirus relief money is not used to bail out states that had significant budget problems prior to the pandemic.
The US has more than 1.5 million confirmed coronavirus cases and over 90,000 Covid-19-related deaths, according to the latest figures from Johns Hopkins University.
States’ efforts to mitigate the impact of the disease, meanwhile, have caused economic devastation that Powell said last week “is hard to capture in words.”
First-quarter gross domestic product declined by 4.8 percent, with the contraction in the second quarter is expected to be much worse.
The unemployment rate, meanwhile, skyrocketed in April by 10.3 percentage points to 14.7 percent – its highest level since the Great Depression of the 1930s.
The country has been sharply divided in recent weeks over the pace at which normal economic activity should resume, with Republicans generally calling for Americans to get back to work (with certain health restrictions in place) and Democrats urging much greater caution.
States with Republican governors also have generally moved faster to reopen their economies than those with Democratic governors. EFE-EPA