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Fed chair Jerome Powell at a virtual press conference in April. Photo: Federal Reserve via Getty Images

The Federal Reserve sees a slowing pace of economic growth after the coronavirus outbreak began to worsen in June, chairman Jerome Powell told reporters on Wednesday.

Why it matters: Powell's comments came as the Fed took its most forceful tone yet to emphasize that the fate of the economy is inextricably linked to the course of the virus — alluding to the fact there is no trade-off between the economy and the pandemic, and that economic recovery is all but impossible if the virus isn't contained.

What he's saying: "Social distancing measures and faster reopening actually go together. They're not in competition with each other," Powell said.

  • The Fed added to its closely watched policy statement released Wednesday that the "path of the economy will depend significantly on the course of the virus," with Powell stressing at his press conference: "It's so fundamental."
  • Though the Fed noted in its policy statement that "economic activity and employment have picked up somewhat in recent months," Powell noted that high frequency data — credit and debit card spending and measures of job growth — are pointing to a slower growth pace as virus cases spike.

The backdrop: As the pandemic worsens, Congress is trying to hash out another stimulus package. Powell emphasized that the Fed will continue doing all it can to support the economy, but more action on the fiscal side will be necessary.

  • He repeated his oft-said line that the Fed only has "lending powers, not spending powers" like Congress and that spending is needed to buoy the economy.
  • Powell said that the economy will need "continued support" from monetary and fiscal policy during the most severe downturn of our lifetimes.

Worth noting: Powell wouldn't comment directly on Republican lawmakers' assertions that continuing the $600 enhanced unemployment benefits "disincentivize" jobless Americans from returning to work — a sticking point among members of Congress (though it's a claim many economists refute).

  • What Powell did say is that workers in industries that involve people gathering together — like restaurants or hotels — will find it hard to return to work.
  • "There won't be enough jobs for them ... and those people are going to need support if they are to be able to pay their bills," Powell said.

Other key takeaways:

  • Dollar swap lines: The Fed said the dollar swap lines established at the onset of the pandemic to ensure U.S. dollars kept flowing, including to other central banks around the world, would be extended through March.
  • Fed's role in inequality: Amid a reckoning over systemic racism in the U.S., Powell said that the critical issue of fixing social inequality "falls to fiscal policy and other policies."
  • Future interest rate hikes are not a consideration among members of the Fed: "We're not even thinking about thinking about thinking about raising rates," Powell said. (For those keeping score, Powell added one more "thinking about" since the last Fed presser in June.)

Go deeper

Felix Salmon, author of Capital
Nov 5, 2020 - Politics & Policy

Government gridlock would be the worst-case economic scenario

Illustration: Sarah Grillo/Axios

Economically, the outcome of the election could not be worse than where we seem to be headed: A Biden presidency with a Republican Senate.

Why it matters: "Gridlock" — where the president's party doesn't control both houses of Congress — is being cheered by financial markets wary of political overreach. Stocks are not the economy, however. In the depths of a global pandemic, fiscal boldness is exactly what's needed for the economy as a whole. The problem is that political obstructionism is all but certain.

Updated 8 hours ago - Politics & Policy

Omicron dashboard

Illustration: Brendan Lynch/Axios

  1. Health: Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations, CDC finds — Omicron pushes COVID deaths toward 2,000 per day — The pandemic-proof health care giant.
  2. Vaccines: The case for Operation Warp Speed 2.0 — Starbucks drops worker vaccine or test requirement after SCOTUS ruling — Kids' COVID vaccination rates are particularly low in rural America.
  3. Politics: Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" by Biden on anti-mask school policies — Federal judge blocks Biden's vaccine mandate for federal workers.
  4. World: American Airlines flight to London forced to turn around over mask dispute — WHO: COVID health emergency could end this year — Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults.
  5. Variant tracker

Arizona governor sues Biden administration over COVID funds tied to mandates

A teacher prepares a hallway barrier to help students maintain social distancing at John B. Wright Elementary School in Tucson, Arizona, on Aug. 14, 2020. Photo: Cheney Orr/Bloomberg via Getty Images

Arizona Gov. Doug Ducey (R) filed a lawsuit Friday against the Biden administration for ordering the state to stop allocating federal COVID relief funds to schools that don't comply with public health recommendations such as masking, the Arizona Republic reports.

Why it matters: The Treasury Department said last week that the state would have to pay back the money if Ducey does not redesignate the $173 million programs to ensure they don't "undermine efforts to stop the spread of COVID-19."