Jerome Powell Says It’s Unclear What Covid-19 Surge Means for Economy
Federal Reserve Chairman Jerome Powell said it remains to be seen how the U.S. economy will weather the recent Covid-19 surge, in comments that offered no views on the outlook for monetary policy.
“It’s not yet clear whether the Delta [coronavirus] strain will have important effects on the economy; we’ll have to see about that,” Mr. Powell told students and teachers Tuesday during a virtual event held by the central bank.
Mr. Powell’s comments on the health situation follow those he made on the topic after the Fed’s policy meeting in late July. He said then that “with successive waves of Covid over the past year and some months now, there has tended to be less economic—less in the way of economic implications from each wave, and we will see whether that is the case with the Delta variety.” He added, “We don’t have a strong sense of how that might work out. So we’ll just be monitoring it.”
Mr. Powell, in a question-and-answer session with students and teachers on Tuesday, didn’t comment on what is next for central bank policy or detail how he expected the economy to perform over coming months. He did say that the economy is unlikely to return to how it was before the pandemic, as sectors reorganize themselves, and added that some groups that were hard hit by the pandemic have yet to fully recover.
Mr. Powell also said the recovery isn’t complete. “The Covid pandemic is still casting a shadow on economic activity. It is still very much with us. We can’t, you know, we can’t declare victory yet on that,” he said.
Speaking at a separate event, Federal Reserve Bank of Minneapolis leader Neel Kashkari expressed concern about what the more virulent Delta Covid-19 variant could mean for the nation.
“I was feeling really optimistic in June and July. It seemed like the light was on at the end of the tunnel, and this is soon to be over, and then the Delta variant emerged and it’s simply much more contagious,” he said. “It could lead to a more sluggish recovery if people are nervous,” Mr. Kashkari said.
Mr. Powell also said that the U.S. financial system is strong and not a source of risk for the economic outlook.
In his prepared remarks, the Fed leader said the coronavirus pandemic has borne down particularly hard on the nation’s students and educators and will change how young people view the world and their place in it.
America’s schoolchildren “have been forced, sooner than most people, to consider what in life is truly important,” Mr. Powell said. With the experience gained in the pandemic, “I hope this will cause you to think about how you want to make your mark, knowing that things do change, and sometimes they change quickly,” Mr. Powell said. “This is an extraordinary time, and I believe that it will result in an extraordinary generation,” he added.
Mr. Powell weighed in as he and his colleagues are preparing for a pullback in the support the central bank has been offering the economy as it has navigated the shock of the coronavirus pandemic. A swift recovery in the economy and declining levels of unemployment are bringing Fed officials closer to the time when they will start paring their $120 billion a month in bond buying. A number of officials have said slowing the pace of these purchases should happen soon.
Mr. Kashkari, who doesn’t currently have a vote on the rate-setting Federal Open Market Committee, said if the job market continues to make progress, “it is a question of when, not a question of if,” the Fed will pull back on its asset buying. “There’s a lot of public discussion about, will it be at the end of this year, will it be at the beginning of next year? Those seem like reasonable ranges of deliberation,” he said.
Mr. Kashkari added that any rise in the near-zero federal-funds rate lies several years off.