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As Pandemic Weighs On Economy, Fed Chair Powell Says Relief Is Needed


The Federal Reserve is upgrading its forecast for economic growth. That is a benefit of the development of coronavirus vaccines. But like vaccine distribution, recovery is going to take a little time. NPR's Scott Horsley joins us now. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: How exactly did Powell assess the state of the economy at this regular meeting?

HORSLEY: Well, the short-term outlook is kind of ominous. I mean, we're seeing thousands of people dying from COVID every day. We're seeing hospitals filling up to capacity. As we've been reporting during the program, businesses around the country are facing new restrictions on indoor dining, that sort of thing, all in an effort to slow the spread of the virus. Even when we're not seeing government restrictions, customers are just reluctant to go out and spend money and go shopping. And Jerome Powell, the Fed chairman, says that anxiety is likely to weigh on the economy through the Christmas holidays and into the new year.


JEROME POWELL: 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.

HORSLEY: And we could see evidence of that in the retail sales data that came out yesterday for November. It was weaker than expected. It showed particular weakness in bar and restaurant sales, for example. We've also seen evidence of this slowdown in the rising unemployment claims each week.

INSKEEP: OK. So things are pretty bad right now. But Powell's job - part of it, anyway - is to look at the near future, look where things are headed. How does he and the rest of the Fed view next year?

HORSLEY: Well, he raised the possibility of a real turnaround next year as the vaccine becomes widely available and people start to feel more comfortable going out shopping and traveling and doing all the things that they've been wanting to do but haven't been able to. The question mark is how long that's going to take. You know, we've never had a massive public health campaign like this. So we're just in sort of uncharted waters. But the economic outlook that the Fed issued this week is rosier than the forecast it offered three months ago. The central bank is now projecting economic growth next year above 4%. And they think, a year from now, unemployment will have fallen from 6.7% down to around 5%.


POWELL: The second half of next year, the economy should be performing strongly. We should be - businesses should be reopening and that kind of thing. The issue is more getting through the next four, five, six months. Clearly, there's going to be need for help there. And my sense and hope is that we'll be getting that.

HORSLEY: And by help, Powell is talking about another relief package from Congress, which is something he's been lobbying for for many months now.

INSKEEP: And he indicates he thinks it's going to come. Now, he knows Congress pretty well. But what makes him so confident there is going to be a relief package?

HORSLEY: Yeah. Obviously, there's been a lot of foot-dragging up to this point. And we're now just over a week away from seeing a lapse in things like emergency unemployment insurance. But, you know, we have seen stepped up negotiations. We're seeing positive signals both from Nancy Pelosi and Mitch McConnell now. And Powell says there does seem to be bipartisan agreement that some kind of additional help is necessary. The Fed chairman pointed to the millions of people who've lost jobs and are not likely to be rehired in the immediate future. He noted the long lines we've been seeing at food pantries around the country and the many, many small businesses that are just hanging on by a thread.


POWELL: Now that we can kind of see the light at the end of the tunnel, it would be bad to see people losing their business, their life's work, in many cases, or even generations' worth of work because they couldn't last another few months.

HORSLEY: You know, the Fed is doing what it can by keeping interest rates low. And they signaled yesterday that rates will stay near zero through 2023. But if you're unemployed and facing eviction or if you're a small business owner who doesn't have any customers, you know, low interest rates aren't what you need. You need a lifeline of cash. And that's something Powell says only Congress can deliver. The quicker people get that kind of help, the less long-term damage the economy is likely to suffer and the stronger the recovery will come - will be once the vaccine is widely available.

INSKEEP: Scott, thanks for your insights, as always.

HORSLEY: You're welcome.

INSKEEP: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.