Jerome Powell: ‘We may well be in a recession’

Federal Reserve Chair Jerome Powell today acknowledged that the U.S. economy might already be in a recession because of measures taken to stop the spread of the coronavirus but said the pandemic must be contained before the economy can recover.

“We may well be in a recession,” the Fed chief said in an interview on NBC’s “Today Show.” But “there’s nothing fundamentally wrong with our economy,” he added. “People are being asked to step back from economic activity … so in principle if we get the virus spread under control fairly quickly then economic activity can resume.”

He said he expected economic activity to “decline probably substantially” from April to June but that the recovery could begin in the second half of the year. “It’s very hard to say precisely when that will be,” he said. “The virus is going to dictate the timetable here.”

Powell highlighted the Fed’s aggressive actions to try to keep credit flowing in the economy and said the only limit on the central bank’s emergency lending is the extent to which the Treasury Department commits funding to cover any losses.

Congress’s coronavirus rescue bill includes $454 billion for Treasury to do just that, a sum Powell suggested could support more than $4 trillion in emergency loans.

Those programs, he said, are an effort to temporarily step in where private-sector investors aren’t offering credit.

“When it comes to this lending, we’re not going to run out of ammunition,” he said. “That’s not going to happen.”

Asked about his message to the American people, Powell said: “The Federal Reserve is working hard to support you now, and our policies will be very important when the recovery does come.”