Jerome Powell needs to be an ambassador as much as he is a central banker when he appears on Capitol Hill this week.
He is scheduled to testify before the Select Subcommittee on the Coronavirus Crisis on Wednesday. This will be the first time this group has heard from the Federal Reserve chairman. And his appearance comes a week after the central bank indicated it expects to keep its key interest rate at zero for at least two more years.
Powell didn’t come right out and say that, though. Instead, the interest rate-setting committee said it would keep rates where they are until inflation picks up above 2 percent. The group doesn’t think that will happen until 2023.
Like all Fed chairpersons, Powell makes measured, almost monotone statements even as his words move markets and economies. Last week, without hyperbole or much verbal passion, Powell declared the pandemic economic downturn “the most severe in our lifetimes.” He shared credit for a rebounding job market with the pandemic spending approved by Congress in the spring — “forceful and pretty effective” is how he described it.
But he then gently acknowledged “my sense is that more fiscal support is likely to be needed.” He will have to be more direct on Wednesday if Congress is to be moved to OK any new pandemic spending. If there is no more support, “then there would certainly be downside risks” he warned. House Democrats and Senate Republicans have been unable, some will claim unwilling, to find a compromised package of COVID-19 spending priorities to help reinflate the economy.
Powell and his Federal Reserve have been very successful at reinflating the investment markets. Unemployment has been cut in half compared to the spring. Yet, millions remain out of work, small businesses and local governments are struggling, and an eviction tidal wave threatens to break over many communities in the weeks and months ahead.
The Fed won’t direct Congress how to spend money, but the chairman will attempt to support investor confidence by being an ambassador for the entire economy.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.