'Significant uncertainty' around US recovery: Jerome Powell

Despite some recent positive signs, "significant uncertainty" remains about the recovery of the US economy from the coronavirus pandemic, Federal Reserve Chair Powell said Tuesday.

And unless consumers feel confident COVID-19 has been defeated, "a full recovery is unlikely," Powell warned in his semi-annual testimony before the Senate Banking Committee.

The central bank chief once again pledged the Fed will use all of its policy tools to help ensure the recovery, which he said has inflicted the worst pain on low-income and minority groups.

Despite a surprising rebound in employment in May, the economy has shed nearly 20 million jobs since February and the contraction of GDP in the April-June quarter "is likely to be the most severe on record," Powell said.

Even with some promising data, "The levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery," he cautioned.

The economic burden from the business shutdowns to contain the spread of the virus "has not fallen equally on all Americans. Instead, those least able to withstand the downturn have been affected most," with the heaviest job losses felt by Hispanics, African Americans and women, Powell said.

"If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing," he said.

Even before the lockdowns were in full effect nationwide, the Fed slashed interest rates to zero and flooded the financial system with cash, and then rushed out a series of lending programs to support businesses as well as state and local governments.

"We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible," he said.

However, the Fed's actions "are only part of a broader public sector response," and the direct support that only Congress can provide "can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy."