By Alfonso Fernandez
Washington, Jun 30 (efe-epa).- Top US economic authorities – Treasury Secretary and Federal Reserve Chairman Jerome Powell – acknowledged on Tuesday in testimony before the House Financial Services Committee that given the enormous magnitude of the challenges posed by the coronavirus pandemic it will be necessary to put together another fiscal stimulus package.
Saying that the Donald Trump administration is monitoring economic conditions closely, Mnuchin noted that certain sectors – like construction, are recovering quickly while others, like retail sales and travel, are feeling the long-term impact of the economic slowdown that could require additional aid.
“We are in a strong position to recover because the Trump administration worked with Congress on a bipartisan basis to pass legislation and provide liquidity to workers and markets in record time,” Mnuchin told lawmakers, adding that the administration is ready to work with Congress in July to pass whatever legislation may be required.
On Wednesday, the current assistance package including additional funding for unemployment subsidies and hundreds of billions of dollars for small and medium businesses, expires, thus putting additional pressure on lawmakers amid a worsening pandemic situation.
The Fed cut interest rates to almost zero and launched a huge monetary stimulus program via liquidity injections and repurchasing of debt, while Congress in late March approved the largest fiscal aid package in US history, valued at more than $2.2 trillion.
Powell appeared along with Mnuchin, emphasizing that the road to US economic recovery is uncertain because a second wave of the coronavirus “could force people to withdraw” and “undermine public confidence which is what we need to get back to lots of kinds of economic activity that involve crowds.”
“A full recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities,” Powell said, adding that “the path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.”
The head of the US central bank added that the country has entered an important new phase earlier than expected, referring to the positive figures in recent weeks including a rise in consumer spending and the May unemployment report that was less negative than anticipated.
The appearance of the two officials comes amid a resurgence in Covid-19 infections across the US, with more than 40,000 daily cases being seen at present and a death toll that had topped 126,000, especially in the South and West during the process of gradually reopening the states’ economies and easing up on restrictions imposed in late May to try and limit the spread of the coronavirus.
In fact, in several states, including heavily populated Texas and California, authorities have had to backpedal on their reopening plans given the recent spikes in infections there.
US economic activity was paralyzed for almost two months starting in mid-March due to the quarantine measures and movement restrictions to contain the virus.
The pandemic forced thousands of companies all around the country to close down temporarily or severely restrict their operations to hinder the spread of the virus, a situation that resulted in unemployment spiking from 3.5 percent at the beginning of this year to 14.7 percent in April, although in May it declined slightly to 13.3 percent.
The situation led – in the first quarter – to the biggest drop in GDP since the Great Recession more than a decade ago, a 5 percent decline in annualized terms.