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WASHINGTON (AP) – Federal Reserve Chairman Jerome Powell says the economic recovery from the coronavirus pandemic has advanced faster than expected, but the central bank has no plans to ease its support efforts.
In a testimony to Congress released Monday, Powell said that while the recovery appears to be strengthening, there are still many weaknesses in the US economy.
“The economic sectors hardest hit by the virus resurgence and greater social distancing remain weak,” he said in his remarks prepared for a supervisory hearing of the House of Representatives Financial Services Committee on Tuesday.
“The recovery is far from over, so we at the Fed will continue to provide the economy with the support it needs for as long as necessary,” said Powell.
Powell noted that the unemployment rate is still up at 6.2%, a statistic that doesn’t fully reflect the number of unemployed Americans who have quit and retired.
He said the Fed will “not lose sight of the millions of Americans who are still suffering, including low-wage service workers, African Americans, Hispanics and other minorities who have been particularly hard hit.”
At its meeting last week, the Fed left its key rate at a record low of 0% to 0.25%. Although it raised its economic forecast significantly, it continued to signal that its key rate would remain unchanged through 2023, which would boost financial markets.
Powell and Treasury Secretary Janet Yellen will testify Tuesday before the House Committee and then testify Wednesday before the Senate Banking Committee in supervisory hearings mandated by Congress when it passed an auxiliary bill last year.
Powell recognized the prompt action taken by the Federal Reserve, local governments, and corporations. He also cited Congressional approval last March of the first COVID relief packages, which provided $ 1,200 in individual benefit payments, unemployment relief and billions of dollars in forgivable loans to small businesses.
“While the economic consequences were real and widespread, quick and determined action avoided the worst,” said Powell.
The situation now seems to be improving, he said.
“New cases, hospital admissions and deaths have been falling since January, and the ongoing vaccinations offer hope for a return to more normal conditions later this year,” Powell said in his prepared statement.
Powell noted that the Cares Act, passed by Congress a year ago, gave the Treasury Department $ 454 billion to use as backing for emergency loan programs the Fed created.
In his testimony, Powell said the loan programs the Fed set up helped free up nearly $ 2 trillion in loans to aid businesses, cities and states.
In a rare split between the Treasury Department and the Fed, then Treasury Secretary Steven Mnuchin announced in November that he would be phasing out five of the emergency loan programs in late 2020, preventing the government from receiving all of the economic support that the Trump administration had enjoyed.
Those Fed programs have expired, but Congress earlier this month approved an additional $ 1.9 trillion bailout package that was pushed by the Biden administration.
Powell said the Fed will soon end its remaining emergency loan programs, despite announcing that it will extend its paycheck protection program loan facility for another quarter to support more small business lending.