Federal Reserve press conference, 2020-12-16 — Chair Jerome Powell

Question (Steve Liesman, CNBC): Thank you, Mr. Chairman, and happy New Year. I know how much you enjoy talking about fiscal stimulus, so let me ask you directly about fiscal stimulus. There’s talk right now of a $900 billion fiscal stimulus program in Congress. Is, is that sufficient? Is that what you’re looking for? Do you think that’ll be sufficient for helping the economy? Finally, you talked about the idea of how concerning the recent surge is. I wonder if you can put some detail on that. How much concern do you have in terms of, where could employment go? What could happen to GDP in the first quarter as a result of this surge? Thank you.
Answer: Okay. So on, on fiscal policy, I would just say a couple of things. The case for fiscal policy right now is, is very, very strong. And I think that is widely understood, I would say, now. The details of it are entirely up to Congress. But with the expiration of unemployment benefits—some of the unemployment benefits, the expiration of eviction moratoriums with the virus spreading the way it is, there’s a need for households and businesses to have, have fiscal support. And I do think that—again, I think that is widely understood. So I think it would be—I, I certainly would welcome the work that Congress is doing right now. It’s not up to us to judge that work. It’s really, really theirs. And I, I don’t have a view for you on, on the size of it. It’s—you know, it’s obviously a substantial bill. On the surge, you know, so it’s a really interesting question. We have, and others too, have consistently expected there to be more economic—that, that cases would hold—growth in cases would hold back the economy more than it actually has. So we’ve overestimated the, the effects on the economy of, of these spikes we’ve been having. Now, this spike is so much larger that I think—and I think forecasters generally do think that there—that this will have an effect on suppressing activity, particularly activity that involves people getting together in bars and restaurants, on airplanes and hotels and things like that. And you’re starting to see that. In the—in the high-frequency data, you’re now beginning to see that show up. And I think if this is—the case numbers are so high and so widespread across the country that that, that seems like it must happen. Now, how big will it be? We don’t—we don’t really know. You know, there are—there are a lot of estimates. The general expectation is, you’re seeing some slowing now. And you’ll see the first quarter could well be—what, what we said is that coming months are going to be challenging. The first quarter will, will certainly show significant effects from this. At the same time, people are getting vaccinated now. They’re getting vaccinated. And by the end of the first quarter into the second quarter, you’re going to be seeing significant numbers of people vaccinated. And so then what will be—how will that play into economic activity? Again, we don’t have any experience with this. You have to think that sometime in the middle of next year, you will—you will see people feeling comfortable going out and engaging in a broader range of activities. And some people will be probably quick to do that. Some are doing it now without a vaccine—right?—in many parts of the country. So, nonetheless, my expectation—and I think many people have the expectation that the second half of next year should—the economy should be performing strongly. We should be— you know, we should be getting people back to work. Businesses should be reopening and that kind of thing. The issue is more the next four or five months—getting through the next four, five, six months. That is key. And, and, you know, clearly there’s going to be need for help there. And, and, you know, my sense and hope is that we’ll be getting that.