In a nod to the bleak outlook for the United States, the Fed calls for more budget support By Reuters

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – The head of the Federal Reserve warned on Wednesday against an "extended period" of weak economic growth, promised to use the power of the United States central bank as needed and called for additional budgetary expenditures to stem the consequences of the Coronavirus pandemic. .

Fed President Jerome Powell has released his sober balance sheet of an economy hit by a record rate of job losses and preparing for a worse future than most American states. United States It has evolved into reopening after weeks of closings aimed at slowing the spread of the new coronavirus.

The pandemic has killed more than 82,000 people in the United States to date, and many epidemiological models now indicate that the number of deaths will exceed 100,000 in a few weeks.

Powell highlighted the uncertainty as to how future virus epidemics can be controlled and how quickly a vaccine or therapy can be developed, and said that policy makers must be prepared to face "a range "of possible results.

"It will take time to get back to where we were," said Powell in a webcast interview with Adam Posen, director of the Peterson Institute for International Economics. "I think there is a growing feeling that the recovery may come more slowly than we would like. But it will come, and it may mean that we need to do more."

For a central banker who has spent part of his career as a deficit hawk and tried to avoid giving advice to elected officials, the comments have made an extraordinary wink at the risks faced by the ; American economy. United States Due to the combined economic and health crisis caused by the pandemic.

The central bank of EE. United States It has reduced interest rates to almost zero and established an extensive network of programs to ensure that financial markets continue to function during the pandemic. He has also set up credit facilities that set precedents for businesses and the first purchases of corporate bonds.

Congress, meanwhile, has allocated nearly $ 3 trillion in financial aid during the crisis.

The United States' response to date "has been particularly swift and energetic," said Powell. But the longer these health risks persist, he said, the more companies are likely to go bankrupt and households are constrained by income in a recession that he says fell more on those less able to cope. . Powell said a recent Federal Reserve survey estimated that 40% of households with incomes below $ 40,000 included someone who had lost a job since February.

The worst-case scenario leaves the economy mired in "an extended period of low productivity growth and stagnant incomes … Additional budget support can be costly but useful if it helps prevent economic damage to long term and leaves us with a stronger recovery, "said Powell in what amounted to a direct call to Congress to increase aid during the crisis.

"This compensation is one of our elected officials, who exercise tax and spending powers," he said.

NEGATIVE RATES

The Fed, for its part, will continue "to use our tools to the fullest until the end of the crisis and the economic recovery," said Powell. But these tools, he said, do not include driving interest rates below zero, as other central banks have done in the fight against the global financial crisis over a decade ago. Negative interest rates, he said, "are not something we are considering".

The main American stock market indices United States They fell sharply in midday trading, the benchmark S&P 500 () falling by around 1.6%. Treasury bill yields fell, and some interest rate futures contracts continued to trade in a slim chance that the Fed would resort to a negative rate policy during the course of the year. year.

The House of Representatives and the United States Senate are considering new responses to the pandemic. White House officials have said they want to assess how an initial phase of state economic reopening is being conducted before deciding what to do.

A growing number of American governors. United States He lifted restrictions, measures that in other countries preceded new outbreaks and increasing cases, and that epidemiologists here https://reichlab.io/covid19-forecast- fear hub will do the same.

But with the American economy. United States After losing 20.5 million staggering jobs in April alone and some 33 million Americans claiming unemployment benefits since late March, many state and local leaders began to see the economic risks of continued blockade as too high.

In a Senate hearing on Tuesday, Anthony Fauci, director of the National Institute of Allergies and Infectious Diseases, spoke of the risk that the country would "paradoxically" end worse if it reopened too much randomly and ended not only with new rounds of infections but a second wave of restrictions on who can go to work and which companies can stay open.