Fed Chair Powell Says U.S. Recovery 'Strong But Incomplete', Urges Stimulus Agreement From Congress

Fed Chairman Jerome Powell once again urged lawmakers in Washington to come to an agreement on fresh stimulus to support the U.S. recovery, which he said was "strong but incomplete".

Federal Reserve Chairman Jerome Powell cautioned Tuesday that the U.S. economic recovery is "strong but incomplete" and needs further support from Congress in order to extend into the coming year.

In prepared remarks for a webcast speech to the National Association for Business Economics in Chicago, Powell said the broadest measure of unemployment sits at around 11%, following the loss of around 22 million jobs since the pandemic began in early March, and noted the current outlook remains "highly uncertain".

Powell warned that a muted policy response could weaken the country's recovery dynamics, and suggested there was more risk to providing less support to the economy that spending too much. 

“The expansion is still far from complete. Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses," Powell said. "Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth." 

"By contrast, the risks of overdoing it seem, for now, to be smaller. 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."

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U.S. stocks were little-changed as Powell's remarks hit the tape, with the Dow Jones Industrial Average holding onto an early 95 point gain, thanks in part to stronger energy stocks, and the broader S&P 500 edging only modestly into positive territory. 

Benchmark 10-year Treasury note yields, meanwhile, were marked at 0.787%, pegging the gap between 2-year note yields at 64.4 basis points, the highest since June.

Powell's comments come as lawmakers in Washington continue to debate both the need, and size, of a coronavirus relief bill prior to the November Presidential elections.

Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi have been negotiating for weeks, and appear to have closed at least some of the gap between what Senate Republicans are prepared to spend and what House Democrats insist is needed to absorb a wave of job losses expected in the coming weeks.