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The end of the coronavirus recession is in sight, but Americans still need to stay vigilant, Federal Reserve Chair Jerome Powell said.
Since the pandemic slammed the economy more than a year ago and fueled outsize job loss, Powell has remarked that the path to a full recovery is dependent on the pandemic. The central bank chief echoed his remarks on Wednesday. Though the March jobs report offers an encouraging look at how the country is faring, the coronavirus and its variants are the “main risk” to bullish outlooks, Powell said.
“The economy, at this point, does seem to be at a bit of an inflection point,” he said during a virtual event hosted by the Economic Club of Washington, DC. “We’d be wise to keep wearing masks and being socially distant, at least for a while longer.” It’s not the first time Powell’s revealed a more positive outlook for the economy. Powell previously said March was an economic “inflection point” during a “60 Minutes” interview that aired over the weekend.
The improving rate of vaccination, lower COVID-19 case counts, and stimulus passed by Democrats last month all contributed to a stronger pace of recovery last month. Consumer sentiment jumped to one-year highs, spending remained at elevated levels, and job growth outpaced economist forecasts.
Yet the Fed hasn’t indicated it’s even considering pulling back on its accommodative policy. Powell reiterated that the central bank won’t taper its emergency asset purchases until it sees “substantial further progress” toward its goals of above-2% inflation and maximum employment.
The plan to hold interest rates near zero for a prolonged period is in part to guide the labor market to a complete and inclusive recovery. The central bank adjusted its employment target to “maximum employment” from “full employment” in August, reflecting the desire to foster a labor market where unemployment is low across gender, racial, and income lines.
Addressing such longstanding disparities can give way to a more inclusive and faster-growing economy, Powell said.
“They kind of hold the economy back. We all want an economy where everyone has the ability to contribute to, and benefit from, the prosperity that we have in our great economy,” he added.
Powell also revealed that he hasn’t met and had policy conversations with President Joe Biden. The absence of such talks marks a stark reversal from how President Donald Trump frequently pressured the Fed to lower interest rates and critiqued Powell for the central bank’s independence.
That doesn’t mean there isn’t any communication between the Fed and the executive branch. Powell noted that he holds weekly conversations with Treasury Secretary and former Fed Chair Janet Yellen on the state of the economy. The conversations help the two bodies work more effectively, but there are “no concerns” about overstepping, Powell said.
“Both of us understand that Fed and Treasury have different authorities and different roles, but have a long history of institutionally working together for the good of the country,” he said. “We respect the very clear lines, stay-in-your-lane kind of thing.”
The Federal Open Market Committee next meets on April 27 to discuss its policy stance and the progress of the economic recovery.
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