Fox Business/Brittany De Lea
Fed’s Powell: Economic recovery ongoing but far from complete
Federal Reserve Chair Jerome Powell is set to testify before the House Financial Services Committee on Tuesday, where he will update lawmakers about the ongoing economic recovery amid the coronavirus pandemic.
In prepared remarks released on Monday, Powell noted that the recovery has “progressed more quickly than generally expected” and appears to be strengthening.
“However, the sectors of the economy most adversely affected by the resurgence of the virus, and by greater social distancing, remain weak, and the unemployment rate—still elevated at 6.2 percent—underestimates the shortfall, particularly as labor market participation remains notably below pre-pandemic levels,” Powell’s statement read. “The recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”
The Fed chair has maintained the worst-case-scenario economic fallout was avoided thanks to swift action out of Congress to pass fiscal support in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent relief bills.
He has also repeatedly said, however, that the path of the recovery will depend on the trajectory of the virus.
CNN Business/Julia Horowitz
What’s keeping America’s top economists up at night
There’s a reason economics is frequently called the “dismal science.”
What’s happening: The US economy is on track for a boom, with the Federal Reserve predicting last week that it would expand by 6.5% this year. That would mark the fastest growth since 1984, when Ronald Reagan was serving his first term as president.
But a survey of the country’s top economists published by the National Association for Business Economics on Monday shows that many in the field are still worried about what could be coming down the pike.
See here: A majority of the 205 members surveyed said they believe risks to inflation are greater than those seen in the past two decades.
Inflation concerns have been in the spotlight thanks to anxiety on Wall Street. Investors, fearful that a rush to eat out at restaurants and hop on planes later this year could trigger a spike in prices, have sold US government bonds in recent weeks. Inflation, not coronavirus, is now the top risk cited by portfolio managers recently polled by Bank of America.
The big worry is that a burst of inflation could force the Fed to raise interest rates or taper bond purchases sooner than expected in order to cool off the economy. Almost half of NABE respondents think the central bank could roll back some stimulus measures by the end of 2022, while 40% don’t think that will happen until at least 2023.
That’s not all: More than 40% of economists surveyed said they think stimulus measures passed by the US government have been “about right.” But they’re also keeping an eye on elevated levels of borrowing. If rates were to suddenly rise, the cost of making interest payments on piles of debt could become increasingly burdensome.
Third Covid wave hits Europe: Lockdowns imposed and vaccines remain a problem
More than a year after the coronavirus outbreak was declared a pandemic, Europe is continuing to struggle with the virus amid a third wave of infections and ramping up of lockdown measures.
At the same time, the bloc’s vaccination rollout remains sluggish, hit by manufacturing issues and supply snags, to the extent that European Union leaders are meeting this week to discuss — once again — the introduction of possible vaccine export bans.
It comes as a handful of countries re-introduce lockdowns to curb a third wave of infections, with France, Poland and Ukraine all implementing stricter measures at the weekend that are set to last several weeks at least.
A month-long partial lockdown was reintroduced in Paris Saturday, as well as in 15 other regions in France, in an effort to get on top of rising case numbers, largely attributed to new, more infectious Covid variants.
The latest partial lockdown is less stringent than previous ones, however, prompting some to question the point of such a move, while others have said that the new measures are confusing. A curfew is still in place and inter-regional travel remains effectively banned. Around 21 million people in France are affected by the new rules.
The country reported over 30,000 new daily cases on Sunday, bringing the country’s total number of infections to over 4.2 million. Over 92,000 people have died due to the virus in France to date.
Meanwhile, Europe’s largest economy Germany could be set to extend a national lockdown into April as the country also battles a third wave of Covid-19 cases. Several states have reportedly called for an extension to current restrictions as the Covid incidence rate passed 100 cases per 100,000 people, a level the government previously said would prompt it to implement an “emergency brake” — a stalling of the lifting of lockdown measures — to prevent further spread.