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Federal Reserve Board Chairman Jerome Powell testifies during a hearing in Washington on Sept. 24, 2020.

POOL/Reuters

The rising likelihood of an effective coronavirus vaccine is good news for the economy in coming months, U.S. Federal Reserve chair Jerome Powell said on Thursday, but near-term risks remain as the COVID-19 disease continues to spread unchecked.

“That is certainly good and welcome news for the medium term,” Mr. Powell said in remarks to a virtual European Central Bank forum. But “from our standpoint it is too soon to assess with any confidence the implications of the news for the path of the economy especially for the near term. ... The next few months could be challenging.”

And as he has for months, Mr. Powell repeated his view that more action from both the Fed and from Congress, in the form of further fiscal stimulus, will likely be needed.

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Even after the unemployment rate falls further, he said, some workers will continue to need help finding jobs in what will be a changed economy. And, he said, he worries that when all is said and done, the pandemic will have damaged the economy’s long-term productive capacity.

“It’s women who are not by choice out of the labour force, it’s kids who are not getting the education they should be getting, it’s small businesses [and] generations of institutional capital that’s being destroyed, and it’s just workers who are out of work for a long period of time and losing their connection to the labor force and really losing the life that they have.”

Mr. Powell also said the Fed is in the process of applying for membership to the Network for Greening the Financial System, the international central banking organization focused on climate change. The Fed is the only major central bank that isn’t a member.

“Central banks around the world are working on this, and what we are really working on is, how do we incorporate climate change risk into all that we do,” including monetary policy, bank regulation and financial stability, Mr. Powell said. “It follows from our assigned legal mandates, though, that we do this work.”

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