The US economy started to rebound earlier than expected, but the recovery will depend on containing the coronavirus and on government efforts to provide support, Federal Reserve Chair Jerome Powell said Monday.
In comments just days after several southern and western US states, including Texas and Florida, were forced to reimpose restrictions after seeing COVID-19 cases spike, Powell said efforts to reopen businesses caused spending and hiring to jump in May.
While the April-June quarter is likely to see the largest decline in GDP on record after authorities shut down businesses nationwide, “We have entered an important new phase and have done so sooner than expected,” Powell said in testimony prepared for delivery at a House Financial Services Committee hearing Tuesday.
But while that “bounceback” is welcome, he warned that keeping the virus in check remains a challenge.
“The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” he said.
“A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.”
The Fed chief will appear at the hearing with Treasury Secretary Steven Mnuchin to discuss the CARES Act approved in late March, which provide massive lending and aid to businesses and families.
Those programs, which also include a host of lending and bond buying efforts by the central bank, remain crucial, Powell said.
He highlighted once again that the impact of the economic downturn has not been shared equally, and the damage to low-income households as well as African Americans and Hispanics “has caused a level of pain that is hard to capture in words.”
“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,” Powell said.