Watch Live: Powell and Yellen Testify on Coronavirus Recovery

Watch Live: Powell and Yellen Testify on Coronavirus Recovery

Watch Live: Powell and Yellen Testify on Coronavirus Recovery

Watch Live: Powell and Yellen Testify on Coronavirus Recovery

America’s top two economic officials told senators on Wednesday that the economy is healing but still in a deep hole, and that continued government support is providing a critical lifeline to families and businesses.

Jerome H. Powell, the Federal Reserve chair, and Janet L. Yellen, the Treasury Secretary and Mr. Powell’s immediate predecessor at the Fed, are testifying before the Senate Banking Committee. Their prepared comments echoed their testimony before House lawmakers on Tuesday.

Mr. Powell said in his remarks that the government averted the worst possible outcomes in the pandemic economic recession with its aggressive spending response and super-low Fed interest rates.

“But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes,” he said.

Ms. Yellen, who pushed hard for the recently-passed $1.9 trillion relief package, said that responding to a crisis with a needed surge of temporary spending without paying for it was “appropriate.”

“Longer-run, we do have to raise revenue to support permanent spending that we want to do,” she said.

She said that expanded unemployment insurance, part of the recent relief package, does not seem to be discouraging work and is needed at a time when the labor market is not at full strength.

“While unemployment remains high, it’s important to provide the supplementary relief,” Ms. Yellen said, noting that the aid lasts until the fall. She said that as the economy recovers, the aid “should be phased out.”

The Biden administration is also making plans for a $3 trillion infrastructure package. The fact that the government is spending so much, and contemplating spending more, at a time when the economy is recovering has stoked concerns about inflation among some economists and lawmakers.

Some onlookers fear that the Fed, which has interest rates at rock-bottom and is buying bonds in big quantities to help the economy, might be too slow to react to higher prices.

“I do worry that the Fed may be behind the curve when inflation inevitably picks up,” Senator Patrick J. Toomey, Republican from Pennsylvania, said during his opening remarks.

But Mr. Powell has consistently pushed back on concerns about runaway inflation, and did so again on Wednesday.

“We think the inflation dynamics that we’ve seen around the world for a quarter-century are essentially intact — we’ve got a world that’s short of demand, with very low inflation,” Mr. Powell said. “We think those dynamics haven’t gone away overnight, and won’t.”

Asked specifically about potential supply and demand mismatches — particularly in the context of a ship that had gotten stuck in the Suez Canal, but also in general as the economy reopens — he struck a similarly unconcerned tone.

“A bottleneck, by definition, is temporary,” he said.

He also batted back concerns about a recent increase in market-based interest rates. The yield on 10-year Treasury notes, a closely watched government bond, has moved up since the start of the year.

“Rates have responded to news about vaccination, and ultimately, about growth,” Mr. Powell said. “That has been an orderly process. I would be concerned if it were not an orderly process, or if conditions were to tighten to a point where they might threaten our recovery.”


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