Last weekend, Federal Reserve Chairman Jerome Powell sat down for a 60 Minutes interview in an attempt to calm investors’ nerves. While his positive comments did help lift stocks on Monday, Powell warned that the economy isn’t out of the woods just yet. Here are just a few key takeaways from the interview:
- The economy could get even worse before it turns around
- Unemployment could climb as high as 25%
- The central bank still has some ammunition to breathe life back into the economy
As one of the most powerful economic policymakers, Powell has a lot of influence over how investors and lawmakers react. He’s mentioned before that the pandemic crisis could cause “lasting damage” to American prosperity, and that Congress’s $3 trillion bailout is not enough to avoid slow economic growth and stagnant incomes.1
A couple days after his 60 Minutes interview, Powell made a joint appearance with Treasury Secretary Steven Mnuchin to shed light on just how fragile the economy is right now. They both defaulted to the same talking points, warning of more job losses and the need to take action now to avoid irreparable economic damage. They disagreed, however, on what it will take to jumpstart the economy.
Powell exercised caution and emphasized the need for Congress to funnel more money to state and local governments, as well as businesses. He noted that a full recovery is dependent upon “getting the virus under control, development of therapeutics, development of a vaccine.” Mnuchin, on the other hand, discussed the importance of getting people back to work in a safe way. His perspective reflects the Trump administration’s shift away from fiscal support to encouraging states to reopen.
So, why is the timing of this joint call with lawmakers important? Both Powell and Mnuchin agree that there will be more challenges ahead, along with a slow recovery. But lawmakers are now left wondering what to do next as the clock ticks. Will there be another stimulus package? There’s growing momentum for another wave of payments, but nothing has passed just yet.
Keep in mind that the IRS is still sending checks to eligible taxpayers from the first CARES Act. The next course of action remains undecided, and unfortunately, there are no easy answers. As we await next steps, you can get up to speed on the CARES Act and learn about potential retirement planning opportunities you may be overlooking. Download The 7 things retirees should know about the CARES Act.
1 Brown, Courtenay (2020, May 13) Fed chair Powell warns of “lasting” economic damage without more stimulus. Axios. Retrieved from: https://www.axios.com/fed-jerome-powell-coronavirus-spending-e71d88c5-09ec-4410-b08f- 3d4ad6304db0.html