With the $1.9 trillion American Rescue Plan now signed into law and new relief money flowing, Treasury Secretary Janet Yellen on Tuesday expressed her confidence in President Biden’s flagship stimulus bill as Federal Reserve chair Jerome Powell told lawmakers that the worst of the economic crisis was avoided thanks to “swift and vigorous” action from Congress and the Federal Reserve.
KEY FACTS
In a hearing before the House Financial Services Committee, Powell emphasized that the economic recovery is progressing, but still has a long way to go.
Household spending is increasing, manufacturing is up and the housing sector has “more than fully recovered,” Powell said, but other sectors impacted by the virus and social distancing measures (like hospitality and leisure) “remain weak” and unemployment remains high.
In prepared remarks, Yellen noted that the economy is still down almost 10 million jobs from before the pandemic but said she believes the economy may return to full employment next year.
She credited the American Rescue Plan with providing a bridge to help struggling Americans “reach the other side of this pandemic with the foundations of their lives intact.”
CRUCIAL QUOTE
“The recovery has progressed more quickly than generally expected and looks to be strengthening,” Powell said during prepared remarks on Tuesday, adding that the economy’s improvement is in large part due to unprecedented fiscal and monetary stimulus from Congress and the Fed. Powell noted, however, that the recovery is “far from complete.”
KEY BACKGROUND
Last week, the Federal Reserve signaled that it will keep rates at near-zero levels through 2023, even though the economic outlook is improving in the wake of the coronavirus crisis. Some economists have raised concerns that the surge of monetary and fiscal support will send inflation soaring to unsustainable levels. Powell has repeatedly said that while a short-term spike in prices and wages is to be expected this year as relief money and pent-up savings make their way into the economy, the Fed is not concerned about the long-term effects of those temporary surges.
This article originally appeared on Forbes.
