Powerful fiscal help from Congress combined with accelerated vaccine distribution has allowed the U.S. economy to recover faster than expected, Federal Reserve Chairman Jerome Powell said Thursday.
At some point, that will allow the central bank to dial back the help it has provided, though he said now is not that time.
“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell told NPR’s “Morning Edition” in a live interview. “We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times.”
“In a nutshell, it’s a combination of better developments on Covid, particularly the vaccines, and also economic support from Congress. That’s really what’s driving it,” he said. “That’s going to enable us to reopen the economy sooner than might have been expected.”
The U.S. has been vaccinating close to 2.5 million people per day, and hospitalization and death rates have been generally coming down even though case loads have plateaued or are gradually rising in some states.
Congress has approved more than $4 trillion in stimulus over the past year and is looking at possibly another $3 trillion in future spending.
Powell called the current fiscal practices “unsustainable” though necessary in the face of the crisis. Low interest rates are allowing the U.S. to shoulder the debt load without causing too much hardship, though Congress eventually will have to address the debt issue, he said.
“We will need to do that, but that time is not now,” Powell said.
Looking back over the past year, he said he has no regrets about the extraordinary measures the Fed took even as some critics worry that the amount of fiscal and monetary stimulus could prove troublesome later if the economy overheats.
“Ultimately, in a crisis I think what we did served its purpose in staving off what could have been far worse outcomes,” Powell said.