Powell, Yellen Set for First Joint Appearance in Congress

Powell, Yellen Set for First Joint Appearance in Congress

Fed chief is expected to say economic recovery is work in progress; Treasury secretary will likely be questioned on Covid-19 relief package

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen are set to make their first joint appearance on Capitol Hill Tuesday afternoon when they testify on the government’s pandemic relief efforts.

Mr. Powell is expected to tell lawmakers that the economy’s recovery remains far from complete despite recent improvement and that the central bank plans to continue providing support.

“The recovery has progressed more quickly than generally expected and looks to be strengthening,” he said in prepared remarks released Monday. “But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”

The Fed has held its benchmark interest rate near zero since the effects of the Covid-19 pandemic slammed the U.S. economy a year ago. Most central bank officials don’t expect to raise the rate until 2024 at the earliest. The Fed also plans to continue buying at least $120 billion a month of Treasury debt and mortgage-backed securities until the economic recovery makes “substantial further progress,” it said in its latest policy statement.

The hearing, which will be Ms. Yellen’s first since being sworn in as Treasury secretary, is required each quarter under the March 2020 Cares Act, which provided the Treasury with $454 billion to support emergency Fed lending programs as the pandemic unfolded last year.

Credit markets rebounded strongly, and the Fed ultimately bought fewer than $30 billion in loans and other assets. Mr. Powell said Monday that the facilities had helped unlock almost $2 trillion in credit to support businesses, cities and states.

Then-Treasury Secretary Steven Mnuchin decided on Nov. 19 to let five of the special programs expire, triggering a partisan fight over whether the Biden administration should have access to the money. Congress included language in a December relief bill restricting the Fed’s ability to replicate programs identical to the ones it started in March without the approval of Congress.

Tuesday’s hearing before the House Financial Services Committee is the first of two days of congressional testimony; Mr. Powell and Ms. Yellen will testify before the Senate Banking Committee on Wednesday.

While the hearings are meant to focus on the pandemic credit programs, Mr. Powell and Ms. Yellen are also likely to face questions on the broader economic recovery, the Treasury’s implementation of the $1.9 trillion Covid-19 relief package enacted this month, and the Fed’s decision last week to end emergency capital relief for big banks.

“With the passage of the Rescue Plan, I am confident that people will reach the other side of this pandemic with the foundations of their lives intact,” Ms. Yellen will say to lawmakers, according to the text of her prepared remarks. “And I believe they will be met there by a growing economy. In fact, I think we may see a return to full employment next year.”

Republicans are likely to press Ms. Yellen on how the Treasury will interpret a provision in the new stimulus law restricting states’ ability to cut taxes if they accept federal aid. GOP lawmakers have said the measure may be unconstitutional, and state attorneys general have asked Ms. Yellen for more guidance.

Democrats may also seek more details from Ms. Yellen on the Treasury’s plans to provide rental and mortgage assistance for struggling homeowners under the new relief law. That effort has been complicated by a series of conflicting court rulings over whether a government eviction moratorium is unlawful.

Fed officials and private economists expect the stimulus measures, combined with a relaxing of pandemic-related restrictions as vaccination progress continues, will power the strongest economic growth since the early 1980s.

Mr. Powell has said repeatedly in recent weeks that the Fed is in no hurry to change its easy-money policies until its forecasts materialize in the form of higher inflation and a strong labor market.

Mr. Powell is also likely to face questions from lawmakers from both parties about the Fed’s decision last week to end a yearlong reprieve that had eased capital requirements for big banks. Senior Democratic lawmakers, including House Financial Services Committee Chairwoman Maxine Waters (D., Calif.), cheered the decision, while Republicans had generally pressed for an extension.

By Kate Davidson and Paul Kiernan

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