May 26, 2020 — Fed Chair Calls for more Government Help


Fed Chair Jerome Powell reiterated last week that additional spending by Washington could be needed to prevent long term damage from high unemployment and surges of bankruptcies. He said, “The scope and speed of this downturn are without modern precedent and are significantly worse than any recession since WWII.”

Powell disagrees with the White House’s views on the economy, which is nothing new. Last year the Fed and the President were at odds, with Trump faulting Powell for not providing more stimulus, but now the tables are turned. The Fed is calling for greater stimulus and the administration is hesitant. The Fed doesn’t think the recovery will be V-shaped, as put forth by Treasury Secretary Steve Mnuchin, saying the government’s initial relief measures are not enough.

Powell believes the recovery will be held back until Americans believe it is safe to resume commercial activity that involves person-to-person contact. “The number one thing is people believing that it’s safe to go back to work so they can go out,” he said. “That’s what it’ll take for people to regain confidence.”

Boston Fed President Eric Rosengren thinks unemployment will peak at 20% this year and stay above 10% through the year. He calls for monetary and fiscal policy moves to minimize the economic pain from the pandemic.