- Fed Chairman Jerome Powell tells the Senate Committee on Banking, Housing, and Urban Affairs that the country's real GDP this quarter "is likely to be the most severe on record," according to his prepared remarks.
- He does add that some "indicators have pointed to a stabilization, and in some areas a modest rebound, in economic activity."
- But still, unemployment and the levels of output "remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery," he said.
- As he has before, Powell warns of the potential for longer-term damage from permanent job loss and business closures.
- Update at 10:20 AM: Inflation is likely to remain low for some time, but should stabilize then gradually increase as the recovery proceeds, he said.
- 10:39 AM: "What we learned during the last, long expansion is that a tight job market is probably the best single thing the Fed can do to support gains by all low and moderate income communities, and particularly for minority communities who are heavily represented in those groups."
- 10:55 AM: The Fed's move to buy corporate bonds is a follow-through on its promise it made earlier, Powell said.
- "It's out of an excess of caution to preserve these gains for market function by following through," he said.
- The corporate bond purchases are "really going to depend on the level of market function," and the central bank will be reduce purchases as market function improves, Powell said.
- “I don’t see us wanting to run through the bond market like an elephant snuffing out price signals, things like that.”
- 11:09 AM: Powell declined to describe the potential effect that the rising government deficit will have on inflation, but said the real effect will be to push the rising debt onto the next generation.
- "We've been on an unsustainable path for awhile...We need to get back to a sustainable path," and that should be done when the economy is growing, he said.
- 11:25 AM: The Fed's briefing on yield-curve control was intended to educate the central bank officials; no decision has been made on whether the Fed should add it to its toolkit.
- He repeats that the Fed "isn't thinking about thinking about raising rates."
- 11:30 AM: Racial inequality "is a longer-term weakness of our economy" and "it's not a healthy feature of our economy."
- 11:33 AM: Concerns about mortgage servicers have eased some, but the Fed continues to monitor conditions in the sector.
- Regarding overall economy, "long run, don't sell the U.S. economy short. Long run, we'll have a full recovery."
- "It's going to take some time to get all the way back to where we were."
- 11:39 AM: As he has stressed before: "There's a reasonable probability that more (stimulus) will be needed, both from you (meaning Congress) and the Fed."
- Powell doesn't see higher inflation as a likely outcome.
- 11:44 AM: He assures Senator Kevin Cramer that BlackRock's (NYSE:BLK) stance on climate change won't hurt the country's oil and gas industry through its role in the CARES Act. The asset manager is playing "an administrative role; we set all the policy decisions," Powell answered.
- 12:05 PM: "I think you'll (Congress) want to continue to support workers in some form," Powell said. Even if a lot of jobs come back quickly, "there are still going to be people who don't have jobs" and may be out of work for awhile, especially those who work in the travel and hospitality industries.
- 12:15 PM: Regarding the Main Street Lending Program, "we feel there's substantial interest on the part of banks" to participate as lenders. Specifically, he mentioned the "generous origination fee."
- Lender registration is open and banks can start lending as soon as they register.
- 12:31 PM: Testimony ends.