Powell Says Vaccine News Good But Economy Has Long Way to Go

Federal Reserve Chair Jerome Powell said recent progress on finding a vaccine was good news in the medium term, but the U.S. economy still has a “long way to go” before it fully recovers from the pandemic.

“The Fed will stay here and be strongly committed to using all our tools” to support the economy, Powell told a virtual event Tuesday. “The next few months may be very challenging.”

U.S. central bankers next meet Dec. 15-16.

Stocks hit record highs this week on the promise of vaccines against the coronavirus. While payrolls have recovered for six consecutive months, a resurgence in infections threatens to curtail activity and slow the recovery as millions of Americans remain out of work.

“The recovery is incomplete,” Powell said. “We have a long way to go.”

In a sign that Americans may be turning more cautious,retail sales rose in October at the slowest pace in six months, Commerce Department data released earlier on Tuesday showed. Weaker momentum in consumer spending — which accounts for two-thirds of the economy — means growth could slow following the third quarter’s record jump in gross domestic product.

With hopes for additional fiscal stimulus this year fading, Fed officials may debate providing additional stimulus next month to sustain the expansion.

Fed officials have cut the benchmark lending rate to nearly zero and are currently buying $120 billion of Treasury and agency mortgage-backed securities a month to keep longer-run borrowing costs low. They have also pledged to keep providing policy support to the economy until inflation measures achieve rates that are consistent with an average of 2% over time.

Fed Vice Chair Richard Clarida said Monday that he wasencouraged by the vaccine news and had “more conviction that the recovery from the pandemic shock in the U.S. can potentially be much more rapid than it was from the global financial crisis.”

— With assistance by Katia Dmitrieva

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