Jay Powell: US economy could shrink 30 per cent over coronavirus
Federal Reserve chairman Jay Powell has warned the US economy could “easily” decline by 20 to 30 per cent over the coronavirus pandemic.
The US central bank boss also warned the economic downturn could continue until late 2021, and there may be no recovery until scientists create a vaccine.
Powell called on the Trump administration to offer more economic relief and to pour more money into the US economy as the crisis drags on.
President Donald Trump has already wound up his coronavirus taskforce as he gears up to reopen the economy.
However, more than 36m Anmericans have filed for unemployment since the start of the pandemic. And 89,562 people have died in the US, which now counts 1.49m infections, according to Johns Hopkins University.
Speaking to CBS show 60 Minutes, Powell said: “This is a time of great suffering and difficulty… you can’t really put into words the pain people are feeling.
“This economy will recover. It may take a while. It could stretch through the end of next year. We really don’t know.”
Unemployment may peak at 25 per cent, Powell said, but he ruled out negative interest rates as a measure to fight the coronavirus fallout.
“I continue to think, and my colleagues on the Federal Open Market Committee continue to think, that negative interest rates is probably not an appropriate or useful policy for us here in the United States,” he said.
Trump has pressured Powell to bow to negative rates – where banks effectively pay people to borrow money – to help citizens through the pandemic.
But Powell told CBS: “There’s no clear finding that it actually does support economic activity on net, and it introduces distortions into the financial system, which I think offset that.”
So far the US has approved almost $3 trillion (£2.5 trillion) in stimulus to help the economy. The packages are worth around 14 per cent of the US economy and Democrats approved another $3 trillion package on Friday.
However, that is not expected to pass the Republican-majority Senate.
Trump’s administration is focused on reopening state economies.
US Health and Human Services Secretary Alex Azar has defended the decision by most states to begin lifting lockdown measures.
He said local leaders can make te decision, saying “in almost half of our reporting counties, we have had not a single death”.
But only 14 US states have reported a decline in new cases for two weeks – a federal guideline to meet to begin reopening – according to Reuters.