By Isaac Cohen*
Chairman Jerome Powell of the Federal Reserve, last week, sent two sobering messages about the US economic outlook. Both messages are based on the assumption that there will not be a second wave of virus spread.
One message, in an interview with the CBS Sunday talk show “60 minutes,” addressed the start and duration of the economic recovery. Chairman Powell said “This economy will recover; it may take a while. It may take a period of time, it could stretch through the end of next year.” (The New York Times 05/18//20). But before the slow start of the recovery, in the second quarter of this year, there will be more job losses and bankruptcies. For instance, Chairman Powell said unemployment in June could reach 25 percent, while the economic contraction in this year’s second quarter could reach between 20 and 30 percent.
For this reason in his other message, during a virtual speech at the Peterson Institute for International Economics a week ago (The Wall Street Journal 05/14/20), Chairman Powell said the economy needs additional fiscal support. The purpose is to prevent more profound damage, such as permanent business closures and long lasting unemployment. This message was addressed to the legislative branch, where the House of Representatives has already approved a fourth rescue package amounting to $3 trillion.
For its part, Chairman Powell said the central bank will do everything it can to provide “relief and stability now” and to support “the recovery when it comes.” https://www.federalreserve.gov/newsevents/testimony/powell20200519a.htm____
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.
