Fed Chair: Economy at Risk If No New Aid Passes

“My sense is that more fiscal support is likely needed,” Fed chair says

Fed Chairman Jerome Powell Speaks at a Senate committee hearing.

Sarah Silbiger / Getty 

The economy is at risk if the government fails to provide more support as it recovers from the COVID-19 crisis, Federal Reserve Chairman Jerome Powell said today.

“My sense is that more fiscal support is likely needed,” Powell said in a press conference. “There are still roughly 11 million people still out of work due to the pandemic. And a good part of those were working in industries that are likely to struggle. Those people may need additional support as they try to find their way through what will be a difficult time for them.” 

Powell said many unemployed people appear to have saved money from the CARES Act relief package passed in March, which provided $1,200 stimulus checks to many Americans and $600 a week of extra unemployment benefits. However, he said that workers have been spending these savings as the months have gone by, and that if there is no additional support, those still unable to find jobs will face evictions and foreclosures that will “scar and damage the economy.” 

The latest projections released today by the Fed show that the central bank expects gross domestic product to grow by 4% in 2021 and gradually settle to 2.5% growth by the end of 2023, with the central bank maintaining near-zero interest rates to support the recovery. The report predicts unemployment will drop from its current rate of 8.4% to 4% by 2023. In a statement accompanying the projection, Powell said the bank also plans to allow inflation to temporarily “moderately” exceed its long-term goal of 2%. 

But members of the Federal Open Markets Committee made those projections mostly assuming that the government would provide more fiscal support, Powell said in the press conference. “If we don’t get that, there would certainly be downside risks,” he said.