Fed Chairman Warns Of “Tragic” Consequences If Stimulus Bill Isn’t Passed
The U.S. could face potentially “tragic” economic consequences if the White House and Congress fail to provide further support to Americans and businesses amid the pandemic, Federal Reserve Chairman Jerome Powell warned on Tuesday.
- According to The Wall Street Journal, Powell told private-sector economists: “At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship.”
- Too much support, Powell said, presents a smaller risk: “Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
- Powell’s remarks came a few hours before President Trump announced he was suspending negotiations with Democrats on another coronavirus stimulus package until after the election, claiming the economy was doing well without additional spending.
"I have instructed my representatives to stop negotiating until after the election," Mr. Trump said on Twitter. The Dow Jones Industrial Average fell around 500 points, or around 1.8%, immediately after the statement.
- Following Powell’s speech, House Speaker Nancy Pelosi (D-CA) said in a statement: “Chairman Powell’s warning could not be more clear: robust action is immediately needed.”
Mr. Trump said he had offered to spend up to $1.6 trillion but he objected to an even larger spending request from Mrs. Pelosi, who is seeking significant relief for state and local governments.
- Powell warned of two prominent risks, The Journal reported.
First, Mr. Powell said rapid initial gains from reopening the economy this summer could turn to a “longer than expected slog back to full recovery” as hard-hit service-sector firms struggle with soft demand.
Second, a prolonged slowdown in the pace of improvement could trigger “typical recessionary dynamics, as weakness feeds on weakness,” he said. Such a slowdown could exacerbate existing racial and wealth disparities in the economy, which “would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic,” Mr. Powell said.