Federal Reserve Chair Jerome Powell made headlines today by calling congressional coronavirus financial relief measures and the Fed’s emergency lending efforts “Dunkirk-like rescue efforts” for the American economy.
In an interview with NPR’s Steve Inskeep, Powell said, “I liken [the financial situation] to Dunkirk. It was time to get in the boats and get the people, not to check the inspection records and things like that. Just get in the boats and go.” His reference was to a bold move by the British at the start of World War II that pleaded with anyone with a boat to retrieve stranded Allied soldiers under air attack by Germans on the beach at Dunkirk.
Fed chairs rarely speak in such quotable language. In his NPR interview today, Powell was very quotable. He said now is not the time in America to worry about national debt, even as the Biden administration is considering a $3 trillion infrastructure bill. “There will come a time – and that time will be when the economy is back to full employment and taxes are rolling in and we’re in a strong economy again – when it will be appropriate to return to the issue of getting back on a sustainable fiscal path,” Powell said. “We will need to do that, but that time is not now.”
“There will come a time – and that time will be when the economy is back to full employment and taxes are rolling in and we’re in a strong economy again – when it will be appropriate to return to the issue of getting back on a sustainable fiscal path. We will need to do that, but that time is not now.”
Powell essentially confirmed the Fed is looking at stress-testing banks for the effects of climate change. “The interesting thing is all of the large and medium-sized banks are asking themselves these very same questions,” Powell said.
And, Powell expressed disappointment over continuing racial inequalities, including at the Fed itself. “We’re trying hard and not at all happy with where we are on it. But we’ll keep at it,” Powell said, citing the Fed’s effort to recruit more Black and Latino economists. “My own experience in the different things I’ve done in life is that institutions that focus on diversity and do it well are the successful institutions in our society.”
In his remarks, Powell was careful to delineate the Fed’s role and the purview of Congress, as he praised the past and concurrent Congress for approving fiscal stimulus measures to help struggling families and businesses. “The amount of fiscal support the economy has received,” he said, “is historically large and that’s going to result in higher economic activity and hiring.”
Powell expressed no regret for the Fed’s mobilization of its emergency lending powers that pumped trillions of dollars into a sagging economy, noting that the bond market has stabilized, the stock market has reached record highs and daily vaccination rates have topped 2.5 million. Powell noted the Fed’s economic forecast released last week that projects a 6.5 percent US economic growth rate in 2021 and a jobless rate falling to 4.5 percent by year’s end.
Powell’s optimistic outlook received an amen in Salem where Oregon legislative co-chairs said the financial assistance to states provided in the American Rescue Plan – $2.6 billion for Oregon – would forestall the need for significant budget cuts and layoffs in the coming biennium that begins July 1. Oregon’s two-year budget, based on revenue from all sources, is expected to reach $28 billion.