It was just three months ago when Federal Reserve Chairman Jerome Powell described the American economy as "healthy" and the outlook as "favorable." That was in mid-February when he last made an appearance before the Senate Banking Committee delivering his mid-fiscal year update.
It will be a very different message he delivers when he returns to the committee in the week ahead.
For the first time since the COVID-19 pandemic hit, America's chief borrower and the country's buyer of last resort are due to testify together to a congressional committee. The Fed chairman will be joined virtually by Treasury Secretary Steve Mnuchin when they appear via video on Tuesday. Their testimony is required by the biggest of the federal government's economic stimulus efforts approved in response to the virus.
The government, through the Treasury Department, has borrowed more than $2 trillion to send most Americans stimulus checks, provide forgivable loans to businesses, and other emergency spending programs. In turn, the central bank has bought more than $1.5 trillion in government bonds, plus hundreds of billions of dollars more in other assets, to support the economy.
The borrower and the buyer, indeed.
The U.S. economy has lost about 20 million jobs because of the public health measures taken to slow the spread of the virus. Last week, Powell described the economic outlook as "highly uncertain and subject to significant downside risks." A few hours after hearing that warning, Mnuchin went to Fox News to offer his "other hand" version of Powell's assessment. "Next year we'll be back to having a great economy just like we had before," he said.
Powell, the buyer, politely pushed Congress to do more. "Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery," he said last week. Mnuchin, the borrower, cautioned patience on Fox: "If we need to spend more money down the road, we'll come back and do that. We're not in a rush to do that this week or next week. We're going to take our time."
Investors will listen to the buyer, and be the judge of the borrower.
