THE US economy will recover from the coronavirus pandemic, but the process could stretch through until the end of next year and depend on the delivery of a vaccine, said Federal Reserve Chairman Jerome Powell.

“Assuming there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year,” the US central bank chief said in a television interview conducted Wednesday, parts of which were aired on CBS’s Face the Nation and 60 Minutes shows on Sunday.

“For the economy to fully recover people will have to be fully confident, and that may have to await the arrival of a vaccine,” said Mr. Powell, seated in the Fed’s stately boardroom at the long table used to deliberate monetary policy. His interviewer was seated at a socially safe distance at the end of the table.

More than 36 million Americans have lost their jobs since February as the economy shuttered to limit virus spread. Countless companies, especially small businesses, are hurtling toward bankruptcy, while states and cities are confronting gaping budget shortfalls that could provoke a massive second wave of layoffs from the public sector.

To limit the harm, Mr. Powell and his colleagues have slashed interest rates to zero, flooded financial markets with trillions of dollars in liquidity, and unveiled nine emergency lending facilities to keep credit flowing in the economy.

Some investors have bet the Fed may be pushed to follow other central banks in adopting negative interest rates, which President Donald Trump has repeatedly called for in the US.

Fed officials including Mr. Powell have consistently batted this idea away, and he did so again on Sunday.

“I continue to think, and my colleagues on the Federal Open Market Committee continue to think, that negative interest rates is probably not an appropriate or useful policy for us here in the United States,” he said, according to a transcript of the full interview. “There’s no clear finding that it actually does support economic activity on net. And it introduces distortions into the financial system, which I think offset that.”

The Fed chief said people should never “bet” against the American economy and firmly played down suggestions that if faced a second Great Depression. But he took care not to promise a swift, so-called V-shaped rebound.

“This economy will recover. It may take a while,” he said. “It could stretch through the end of next year. We really don’t know.”

Mr. Powell also stressed that the central bank hadn’t exhausted its options for aiding the economy.

“There’s a lot more we can do. We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot,” he said. Mr. Powell noted the Fed can increase its emergency lending programs and make monetary policy more supportive through forward guidance and by adjusting the Fed’s asset-purchase strategy.

That could be a veiled reference to yield curve control, where the Fed undertakes to hold yields out to a certain maturity at a certain level, as the Bank of Japan already does. Some analysts expect the Fed to move in that direction later this year.

FISCAL POLICY
Mr. Powell’s remarks follow his grave warning Wednesday that the US economy faces lasting harm from the pandemic if the government doesn’t step up. The comments add support to calls for more congressional spending as Democrats push for a fresh $3 trillion in virus aid on top of a record $2.2-trillion package agreed in March. On Friday, the House passed the measure, though it has no future in the Republican-led Senate.

Mr. Powell can expect questions on the scale and timing of additional fiscal relief when he appears before the Senate Banking Committee on Tuesday.

Pressed on the question during the CBS interview, Mr. Powell said providing more congressional support to state and local governments was “something that deserves a careful look,” and also cited the need for policies to limit business insolvencies and keep workers in their jobs and homes.

He also declined to be drawn into the debate on when the US economy should reopen, beyond saying it should happen carefully to minimize the risk of sparking more infections.

But he opened up when it came to the next time he’d feel safe sitting in a crowd to watch his hometown’s Stanley Cup-winning hockey team, the Washington Capitals.

“Certainly no sooner than next season,” he said. “Public sporting events, public concerts and things like that — those will be among the last things that can be resumed.” The National Hockey League’s 2020-2021 season is scheduled to start in October, 2020. — Bloomberg

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