The coronavirus outbreak has caused the United States economy to take a massive hit, and with so many people out of work, the road back to a normal economy will be a long one.
A big part of getting the economy back to where it was before coronavirus is getting Americans to start spending money. To do this, lawmakers are currently in the middle of discussing a second coronavirus stimulus plan, which the Federal Reserve is now urging might be necessary. This past Wednesday, Federal Reserve chairman, Jerome Powell said that the central bank is committed to using all of its financial tools to get the economy back on track.
A part of getting the economy back on track is keeping the interest rates as low, which will enable businesses to loan money at a very low cost, thus incentivizing the people to spend money and start the slow walk back to a normal economy. Powell states, "We're not thinking about raising rates - we're not even thinking about thinking about raising rates." Back in March, the Fed reduced interest rates to near zero, but that might not be enough to get the economy back on track.
The Fed projects that the unemployment rate to fall from 13.3% in May to 9.3% by December. Unfortunately, Powell also says that the longer the coronavirus isn't contained, the more damage it will cause. "The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures. Long periods of unemployment can erode workers' skills and hurt their job prospects."
Powell said, "If a small or medium-sized business becomes insolvent because the economy recovers too slow, we lose more than just that business. These businesses are the heart of our economy and often embody the work of generations. We are committed to using our full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible."
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Last updated: Jun 30, 2020 at 06:51 pm CDT
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