US economy could 'easily' shrink by 30pc over pandemic, says Fed chair

The business shutdowns caused by the Covid-19 pandemic could 'easily' propel the US economy to contract by 20-30 percent, says chairman of the Federal Reserve Jerome Powell. 

Jerome Powell added in a CBS interview, recorded on 13 May and aired on Sunday evening, that the economic downturn might last until late 2021, and a full rebound may not be happen until a vaccine is found.

However, he expressed confidence the economy would recover, and said he would never bet against the US economy.

Earlier this week, Mr Powell had called on US lawmakers to pass more economic stimulus and relief aid.

More than 36 million Americans have filed for unemployment benefits since mid-March.

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In an interview with CBS' 60 minutes, Mr Power said: "This is a time of great suffering and difficulty... you can't really put into words the pain people are feeling.

"This economy will recover. It may take a while," he said. "It could stretch through the end of next year. We really don't know."

Unemployment could potentially peak at 25 percent, and "the lowest paid people" - particularly women - were being hurt worst by the downturn, he added.

However, he said he believed the US could avoid a depression - a sustained economic downturn - because the financial system itself was healthy, and the coronavirus pandemic was "an outside event" the economy could recover from.

While the economy could "easily" contract 20-30 percent this quarter, he expected the economy to "recover steadily through the second half of this year", as long as the country could avoid "a second wave of the coronavirus".

"It's very important to avoid that... that would be quite damaging to the economy and also to public confidence."

The US has already approved nearly $3 trillion (£2.5tn) in new stimulus spending - packages worth an estimated 14 percent of the country's economy. The Fed has also taken radical steps to shore up the economy, pumping trillions of dollars into the financial system.

On Friday, Democrats in the House of Representatives passed an additional $3tn coronavirus relief package. However, it is not expected to pass the Republican-majority Senate, where leader Mitch McConnell has argued there is "no urgency" to act.

(Source: BBC)