Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }
Coronavirus information
Coronavirus information
The Zero Canada Project provides resources to help you make the most of staying home.
Visit the hub

Federal Reserve Chair Jerome Powell testifies during a House Financial Services Committee hearing in Washington on July 10, 2019.

Erin Scott/Reuters

Federal Reserve Chair Jerome Powell on Friday said a potential surge in U.S. coronavirus infections could derail the recovery from the deep downturn triggered by the pandemic, even as he reiterated the central bank’s vow to keep fighting the crisis.

The Fed has gone all out to steady financial markets since March, lowering borrowing costs and creating credit backstops for companies and local governments reeling from the economic fallout of lockdowns to stop the spread of the novel coronavirus.

More than 101,000 Americans have died from COVID-19, the respiratory illness caused by the virus, and many health officials are worried that infections could spike in the weeks and months ahead as states reopen their economies.

Story continues below advertisement

“I think a second wave would really undermine public confidence and might make for a significantly longer recovery and weaker recovery,” Powell said in a webcast with Alan Blinder, a Princeton University economics professor and former Fed vice chair.

Powell, a graduate of Princeton, spoke a few hours before his youngest daughter was to graduate from the Ivy League college.

“We of course would continue to react,” Powell said. “We are not close to any limits that we might have, I would say ... but I would worry almost more that a second outbreak would undermine confidence.”

The remarks were a somber reminder that the trajectory of the crisis facing the Fed is a function of the public’s health, a factor over which the world’s most powerful central bank has no control.

The U.S. central bank has announced 11 programs to cushion the effects of the economic cratering, and all but two have come on line. The Fed is “days away from making our first loans” under the “Main Street Lending Program” to medium-sized companies, Powell said on Friday, and weeks from opening a lending program for states, counties and large cities.

Investors are now thirsty for clues about when the Fed may restart large-scale bond-buying and firm up promises about how long the purchases might continue. Powell’s remarks, his last public ones before the Fed’s June 9-10 policy meeting, did little to slake that thirst.

Asked about limits to the Fed’s crisis toolkit, for instance, Powell said there were few, noting that in fighting “an emergency of a nature we haven’t really seen before ... we crossed a lot of red lines that had not been crossed before, and I am very comfortable that this is that situation where you do that.”

Story continues below advertisement

The Fed’s lending programs are backstopped by the U.S. Treasury under rules reserved for emergencies. And in an effort to stabilize financial markets, the Fed has ballooned its balance sheet, which it had been trimming before the coronavirus pandemic, to a record-setting level of more than $7 trillion. It may need to do more before the crisis is over, to keep borrowing rates low even as the economic recovery takes hold.

STAYING THE COURSE

Powell has repeatedly promised to keep monetary policy loose until the recovery is well on its way and the U.S. unemployment rate - widely expected to surpass 20% in the second quarter - has returned to healthy levels.

Global investors have been doing the Fed’s work so far, bidding down U.S. Treasury yields to record-low levels - the yield on the benchmark 10-year note has been below 1.0% since late March.

But between a possible economic rebound and the trillions in extra debt the Treasury is in the midst of issuing to help pay for the economic rescue, pressure may build in the other direction, and market analysts are pushing for guidance.

Powell offered none on Friday, though he suggested the Fed would stay the course for now.

“Of course our balance sheet can’t go to infinity,” he said. “I would say that I am comfortable with where we are now and the path we are on, and don’t see risks based on what we’re doing right now to inflation or to financial stability.”

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies