Fed Chair says 'W-shaped' recovery might be too optimistic
A ride that that will include a repeating stop-and-go motion for many businesses in the near and mid-term, until a viable treatment or vaccine for the COVID-19 contagion is discovered.
Ever since the pandemic hit US soil, economic growth slowed to a standstill practically overnight as the government’s lockdown measures shut down all businesses that were considered non-essential. Financial analysts and officials from Trump White House haven’t really come to terms regarding the profundity and deep-seated nature of the economic fallout from virus.
Despite all this, there are officials that believe that a “V-shaped” recovery is possible, one where the nation's economy bounces back shortly after a rapid drop. Meanwhile, other financial specialists anticipate a "U shape," where it will take longer to recover. The possibility of a "W-shaped" recovery has also established a foothold among analysts as healthcare specialists continue to caution that infection cases could spike in autumn, and this spike could bring another downturn in economic growth along with it.
Powell also made some remarks on Wednesday (Apr 29) that showed he foresees significantly more disruption than the "W-shaped" camp. Powell spoke at a press conference following the Fed's most recent strategy meeting, where the central bank emphasized that it will utilize all the tools at its disposal to help the nation's economy.
Calling all current financial forecasts "highly uncertain," he mapped out why he thinks the economy may experience a progression of highs and lows for the foreseeable near-future, and perhaps throughout 2021, as the world fights to stem the pandemic.
The United States has recently passed the one million mark of confirmed novel coronavirus cases, and in excess of fifty-eight thousand fatalities related to the disease – the highest figure on the planet. On top of that, in excess of twenty-six million individuals have claimed joblessness benefits since March 21, as the economy contracted at its fastest pace since the Great Depression.
For each one of those reasons, Powell stated, at this point, the US Federal Reserve will have to wait and see how the situation will evolve, while remaining aware that the financial effect of measures taken to contain the pandemic will be felt, in more ways than one, for years to come.