Federal Reserve Chairman Jerome Powell issued a sober warning about the U.S. economy during his first of two appearances before lawmakers: A full recovery from the recession hinges on control of the novel coronavirus.
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"The levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery," Powell said Tuesday in prepared remarks before the Senate Banking Committee. "Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely."
In the three months since the economy came to a near standstill to limit the spread of the virus, more than 44 million Americans have lost their jobs. Just three months ago, unemployment sat at a half-century low. The outbreak also has been a catalyst for bankruptcies among small and big businesses alike, and economists have warned of an unprecedented contraction in the nation's GDP in the second quarter.
The Fed responded to the pandemic by taking a range of extraordinary actions to support the economy, including slashing interest rates to near-zero, purchasing an unlimited amount of Treasurys (a practice known as quantitative easing) and launching crisis-era lending facilities to ensure that credit flows to households and businesses. It has also said it will buy corporate bonds and lend to states and cities.
In the past eight weeks, the Fed has pumped nearly $2.9 trillion into the economy, and its balance sheet has expanded to almost $7.2. trillion, a record.
Last week, during its two-day meeting, the Fed kept interest rates unchanged near zero and pledged that it will continue to support an economy devastated by the virus, even as states begin to gradually reopen from the shutdown.
"We are committed to using our full range of tools to support the economy in this challenging time," Powell reiterated on Tuesday.
Powell has previously suggested that Congress, which has passed three massive stimulus packages totaling close to $3 trillion, may need to provide additional aid to workers and businesses. He said the direct support allocated in the CARES Act made a "critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy."
Still, Powell said he was "confident" the U.S. economy will eventually return to pre-crisis levels.
"The fact is that we had the largest economic shock in living memory," he said. "We have to be patient with that."