US may well be in recession, says Fed chief Powell

US may be in recession; Control of coronavirus to dictate timing of economy reopening: Jerome Powell

The US central bank chief's remarks are a contrast to the urging by some of President Donald Trump’s advisers for a faster reopening. AFP/File

The United States "may well be in recession" but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen, Federal Reserve chair Jerome Powell said Thursday in an interview on NBC's Today Show.

"We are not experts in pandemic... We would tend to listen to the experts. Dr. Fauci said something like the virus is going to set the timetable, and that sounds right to me," Powell said, in reference to Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases who is on the White House's coronavirus task force.

"The first order of business will be to get the spread of the virus under control and then resume economic activity."

The US central bank chief's remarks are a contrast to the urging by some of President Donald Trump’s advisers for a faster reopening. The president himself has said he wants the economy to be “roaring” by Easter, in a little over two weeks.

The Fed officials who have spoken to the issue, now including Powell, have taken a more somber approach, focusing on the need to first control the virus, then restore confidence among workers and consumers that it is safe to go back to business.

Powell's remarks on Thursday were an unusual acknowledgement by a Fed chair that the economy may be contracting even before data has confirmed it. But the situation is so unusual -- and upcoming reports expected to show such large jumps in joblessness in lost output -- that policymakers have become unusually blunt, and focused on making the contraction a short one.

The aim of the trillions of dollars in lending and bond purchases the Fed has authorized over the past two weeks is precisely to let an otherwise healthy economy pause long enough to keep people safe, Powell said, before what could be a strong rebound later in the year.

"The sooner we get through this period and get the virus under control, the sooner the recovery can come...We know that economic activity will decline probably substantially in the second quarter but I think many expect and I would expect economic activity to resume and move back up in the second half of the year," Powell said.

The Fed chair's rare appearance on a nationally broadcast morning show comes as officials worldwide try to cope with both a health crisis and the deep economic fallout from it. Later on Thursday morning the US Labor Department will release data on claims for unemployment insurance, which are expected to skyrocket due to "social distancing" and mandated shutdowns of many businesses across the country.

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