Fed Chair Powell says economy faces 'new challenges' from virus

Federal Reserve Chairman Jerome Powell said the reopening of the U.S. economy -- and the accompanying upturn in spending and hiring this spring -- has happened sooner than central bank officials expected.

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But he said the push to lift restrictions on commercial activity carried other risks, evidenced by recent increases in coronavirus infections and hospitalizations in states across the U.S. South and Southwest.

"We have entered an important new phase and have done so sooner than expected," Mr. Powell said in testimony prepared for delivery Tuesday morning before a congressional committee. "While this bounce back in economic activity is welcome, it also presents new challenges -- notably, the need to keep the virus in check."

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Powell and Treasury Secretary Steven Mnuchin are slated to testify before the House Financial Services Committee as part of quarterly appearances required by the $2 trillion relief package Congress approved in March, which provided more than $450 billion for the Treasury to cover losses in emergency lending programs run by the Fed.

The Fed has established nine different emergency lending programs, including several to backstop lending to large and small companies, cities and states with $195 billion provided from the Treasury to cover losses.

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"We are strongly committed to using these programs, as well as our other tools, to do what we can to provide stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy," Mr. Powell said in his prepared testimony.

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