WASHINGTON (Reuters) – The head of the Federal Reserve on Wednesday dashed lingering hopes for a fast rebound from the coronavirus pandemic, saying the U.S. economy could feel the weight of consumer fear and social distancing for a year or more in a prolonged climb from a deepening hole.
After a two-day policy meeting in which the U.S. central bank kept interest rates near zero and promised to expand emergency programs as needed to help the battered economy, Fed Chair Jerome Powell offered no sanguine words about how fast the country might return – if ever – to the near-record low unemployment and solid growth of just a few weeks ago.
A first phase of a recovery may actually happen soon, Powell told journalists in a videoconference after the end of the policy meeting, as some U.S. states allow stores and even restaurants to reopen under tightened rules meant to sustain progress in curbing a pandemic that has killed more than 60,000 people in the country.
But even if that takes hold by late summer, “that’s the period as well that creates the risks of new outbreaks of the virus,” Powell said, a scenario that health officials and economic analysts say could leave the economy in a recurring cycle of tentative reopenings followed by reimposed restrictions to fight new outbreaks.
As the easing of social distancing rules proceeds, “people will come out of their homes, start to spend again, we will see unemployment go down, we will see economic activity pick up,” Powell said. “That could be a large increase … It is unlikely it will bring us quickly back to pre-crisis levels.”
“Trying to be really precise about when that might happen and what the numbers might look like – it is very tough to do that.”
In its policy statement on Wednesday, the Fed left its benchmark overnight lending rate in a target range of 0% to 0.25% and repeated a vow to use its “full range of to