In the Semiannual testimony to Congress, Fed Chair Jerome Powell said some recent indicators have pointed to a”stabilization”, and in some ares a “modest rebound” in economic activity. However, levels of output and employment remain “far below their pre-pandemic levels”. “Significant uncertainty remains about the timing and strength of the recovery”. He warned “until the public is confident that the disease is contained, a full recovery is unlikely.”
Powell also noted that “the longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures. ” In particular, the coronavirus pandemic is “presenting acute risks to small businesses”, which are the “heart of our economy and often embody the work of generations.”.
As for inflation, indicators of long-term inflation expectations have been “fairly steady”. “As output stabilizes and the recovery moves ahead, inflation should stabilize and then gradually move back up over time closer to our symmetric 2 percent objective.” Nonetheless inflation is likely to remain below target “for some time”.
