Powell: Inflation fears should not impede more coronavirus aid

Federal Reserve Chairman Jerome Powell said Wednesday that the U.S. economy still faces “considerable risks” driven by the coronavirus pandemic and waived off concerns that further fiscal support could boost inflation.

While Powell said the U.S. economy is ripe for a strong second half, he warned that the pace of COVID-19 vaccinations and the arrivals of new variants still pose serious threats to millions of Americans who are struggling to get by amid the pandemic.

“We’re a long way from a full recovery,” Powell told reporters during a news conference shortly after the Fed announced it would hold interest rates steady and continue purchasing $120 billion each month in Treasury and mortgage bonds.

“Something like 9 million people remain unemployed as a consequence of the pandemic,” he continued, noting a total equal to the peak of the job losses during the Great Recession in 2009.

“Many small businesses are under pressure and there are other needs to be addressed, and the path ahead is still pretty uncertain,” he added.

Powell’s comments come amid growing Republican opposition to President Biden’s push for a $1.9 trillion coronavirus relief and economic aid bill. While Democrats have unified around the measure, Republicans have shown little interest in passing another massive stimulus bill less than a month after former President Trump signed a $900 billion measure.

GOP lawmakers have argued that Biden’s approach would balloon the national debt and cause rampant inflation, hindering the recovery. But Powell, a Republican himself, dismissed those concerns and asserted that the costs of inaction are far greater.

“I’m much more worried about falling short of a complete recovery and losing peoples’ careers and lives and the damage that will do to productive capacity than about the possibility of higher inflation,” Powell said. 

Powell also brushed off questions about the Fed’s role in the recent, staggering rise in the share prices of GameStop and other struggling companies. Some investors and market watchers attribute the performance of the stock market in part to the Fed’s March decision to slash interest rates to near zero during the pandemic and massive fiscal stimulus.

“The shock from the pandemic was unprecedented both in its nature and in its size,” Powell said. “There’s nothing close to it in our modern economic history.”

“It’s very much appropriate that monetary policy be highly accommodative to support maximum employment and price stability,” he said.