Jay Powell issues statement on US economy despite vaccine news

December 04 23:32 2020
Jay Powell issues statement on US economy despite vaccine news

The Fed chairman, Jay Powell, has warned Congress about the rise in COVID-19 cases even as the news of the imminent of a vaccine gladdens the heart of millions of people, especially as it has boosted the medium-term economic outlook.

The rise in new Covid-19 cases, both here and abroad, is concerning and could prove challenging for the next few months. A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities,” Mr. Powell said.

Mr. Powell admitted that the recent developments are positive. However, he advised some form of cautiousness as the pandemic persists. “It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence,” he said.

The Fed chairman is yet to issue any statement directly addressing the rift with Mr. Mnuchi. However, he stated that the central bank’s actions during the crisis had “helped unlock almost $2tn of funding to support businesses large and small, non-profits, and state and local governments since April”.

In what can be presumed to be his tradition, Mr. Powell stated that he would be returning return unused funds from the lending facilities by year’s end, following the instruction from Mr.Mnuchin.

Mr.Mnuchin on the other hand, has urged lawmakers to agree on a “targeted fiscal package” even as he said that the outgoing administration was “ready to support Congress in this effort to help American workers and small businesses that continue to struggle with the impact of Covid-19”.

However, the world awaits any signs of any serious negotiations regarding a new stimulus proposal, as the White House and Republicans propose a relatively smaller package than the $2 trillion package backed by senior congressional Democrats and Joe Biden, the president-elect.

The Fed has also been under some pressure in recent times to provide more monetary support, especially as any additional fiscal relief seems unlikely. This has also become intense following the Fed’s signal that interest rates would remain at rock-bottom levels until inflation hits its 2% and economy reaches full employment.

Fed officials are reportedly contemplating tweaking their asset purchase programme as part of the plans to bolster their loose monetary policy. The direction of the move remains unclear, especially as no general consensus has been reached to justify the reason for such an action.

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