May 29, 2020 - Economy

Fed Chair Powell: Coronavirus is "great increaser" of income inequality

Screengrab of the Federal Reserve chairman Jerome Powell giving a live streamed speech last month

Fed Chair Jerome Powell during a virtual press conference last month. Photo: Federal Reserve via Getty Images

Federal Reserve Chairman Jerome Powell said during a virtual interview Friday that the economic blowback from the coronavirus pandemic is hitting those who can least afford it the hardest.

Why it matters: The U.S. economy has plunged into the worst downturn since the Great Depression at a record pace, and a full recovery may take years. More Americans are collecting unemployment now than ever before in history — and 40% of those out of work are in the poorest U.S. households, per a recent Fed survey.

"The pandemic is falling on those least able to bear its burdens. It is a great increaser of inequality. It is low-paid workers who are bearing the brunt of this and women to an extraordinary degree."
— Powell, speaking to Princeton professor Alan Blinder

Powell’s comments came in response to a question about whether the Fed’s latest policies will lead to more income inequality in America. He said "absolutely not."

  • Powell said the Fed’s recent actions were aimed at "creating an environment" where workers will have the best chance to keep their job, get a new job, or go back to their old job if they were furloughed.
  • The Fed's policies have been cited as one reason for the stock market's rebound.

Powell also said that its loan program for medium and large businesses, called the Main Street Lending Program, is "days away" from making its first loans.

  • Powell added that a full economic recovery "will really depend on people being confident that it's safe to go out," while a second wave of the outbreak would "undermine public confidence and might make for a significantly longer recovery, and weaker recovery."

The backdrop: The Fed has taken huge — and sometimes unprecedented — steps in an effort to support key funding markets and the economy.

  • "We crossed a lot of red lines, that had not been crossed before ... this is that situation in which you do that, and you figure it out afterward," Powell said.
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