A resurgence of COVID-19 in the winter months, as some health experts have warned might happen, would have “tragic effects” on the health of Americans and the economy, Federal Reserve Chairman Jerome Powell warned in a speech on Tuesday.
“Managing this risk as the expansion continues will require following medical experts’ guidance, including using masks and social-distancing measures,” Powell said at the National Association for Business Economics annual meeting.
Powell’s warning came a day after President Donald Trump, infected with COVID-19 and contagious, left Walter Reed National Military Medical Center to return to the White House, removing his mask with a flourish as he stood on the Truman Balcony.
Trump and his campaign surrogates have made fun of people who wear masks, including Democratic presidential nominee Joe Biden, even though Trump’s own administration has urged Americans to adopt facial coverings to stem the spread of the virus.
A second wave of coronavirus could “more significantly limit economic activity, not to mention the tragic effects on lives and well-being,” Powell told NABE members. “A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy. That would be tragic.”
It’s rare to hear the leader of the globe’s most powerful central bank speak in strong terms on any topic. For many listeners, it was the first time they had ever heard a Fed chairman warn of “tragic” consequences, as the Fed chairman did twice during his Tuesday speech.
Powell, who was known as a deficit hawk before the pandemic struck, also used his speech to urged Congress to pass legislation to provide additional support to the economy as it struggled with COVID-19.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”
It was better for Congress to err on the side of doing too much than too little, Powell remarked.
“The risks of overdoing it seem, for now, to be smaller,” he said. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste. The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”