Federal Reserve Chair Jerome Powell said Wednesday (July 29) that the road to economic recovery is “extraordinarily uncertain” and will be heavily influenced by how well the country keeps the pandemic under control.
“Indeed, we have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity,” Powell said in a press conference following a two-day meeting in which the central bank decided to leave its key funds rate unchanged.
As PYMNTS reported in July, retail foot traffic had slipped in states where cases were on the rise, such as Texas, Arizona, Florida, South Carolina and Georgia. At the time, the report noted a lack of adherence to wellness protocols, such as social distancing and mask wearing — along with a rush to open businesses again — could lead to further bad news.
In his remarks, Powell said some consumer spending measures based on the use of credit and debit cards have declined as of late June. In addition, recent labor market indicators show slowing in job growth, particularly among smaller businesses.
“A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” Powell said. “The path forward will also depend on policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.”
Almost two-thirds of economists recently polled said it would take at least two years for the U.S. economy to return to its pre-pandemic levels. Meanwhile, others said recovery would happen in one to two years.
The Fed said in a Wednesday (July 29) statement that the Federal Open Market Committee (FOMC) chose to keep the target for the federal funds rate at zero percent to 0.25 percent.
In the press conference, Powell acknowledged that the Fed has kept the policy rate near zero since the middle of March.
“We will keep it there until we are confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals,” Powell said.
McBride said, “The Fed has slashed interest rates and kept credit flowing to consumers, businesses and municipalities. But they can’t tame the virus or manufacture demand, and that’s what the economy desperately needs in order to bounce back.”