Federal Reserve Chairman Jerome Powell said the pace and scope of the current U.S. economic downturn are 'without precedent" and cautioned that recovery could take longer than expected to gather momentum.
Speaking as part of a webinar with the Peterson Institute for International Economics, Powell said the Fed's response to the crisis, which has provided some relief, but 40% of U.S. households with less than $40,000 in annual income losing at least one job and there are still "significant downside risks" to the current outlook.
"The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased," Powell said. "Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs."
"While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks," Powell added.
U.S. stocks slumped lower following the chairman's remarks, with the Dow Jones Industrial Average falling 265 points shortly after the opening bell while the broader the S&P 500 tumbled 23 points to 2,870 points.
The U.S. dollar index, meanwhile, fell 0.45% against a basket of six global currencies to 99.58 points, while benchmark 10-year Treasury note yields slipped to 0.657%
Powell said the Fed would use its current policy toolkit "to its fullest until the crisis has passed and the economic recovery is well under way", but appeared to dismiss the idea of negative interest rates.
The Fed Chair said the evidence to support such a move was "mixed", insisting that, for how, "it's not something that we’re considering. We think we have a good toolkit."
President Donald Trump raised the prospect of such a move yesterday, Tweeting that the U.S. should accept what he called a "gift" that is benefiting other countries around the world.
Powell also repeated his view that more fiscal support will be needed to support the recovery, even while noting that current spending from Congress has amounted to around 14% of GDP and has been the "largest response for any postwar downturn".
U.S. lawmakers are contemplating stepping-up their COVID-19 response, with House Democrats floating an additional $3 trillion in rescue funds, with increased support for states and farmers, that Republican Senate Leader Mitch McConnell dismissed as a partisan "wish list" that had "no chance" of becoming law.