Economy

Fed Chair Powell: Economic Recovery Depends On Success In Controlling Pandemic

Fed Chair Powell: Economic Recovery Depends On Success In Controlling Pandemic

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.

Interest Rates

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.

Bankrate.com Chief Financial Analyst Greg McBride said in a statement that the Fed reduced interest rates and has maintained the flow of credit, but the measures can only go so far.

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.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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