Fed chair Jerome Powell: ‘Too little support’ will lead to weak recoveryFederal Reserve Chairman Jerome Powell says the economic expansion is “still far from complete.”Federal Reserve Chair Jerome Powell urged Congress on Tuesday to pass a robust stimulus, saying that providing inadequate support would weaken the recovery from the coronavirus recession while “overdoing it” would only strengthen the rebound.“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Powell said in a speech at a virtual annual meeting held by the National Association for Business Economics. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”Meanwhile, he said, there’s little downside to passing a relief package that some may view as excessive.“By contrast, the risks of overdoing it seemed, for now, to be smaller,” he said. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste. The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side-by-side to provide support to the economy until it is clearly out of the woods.”Powell’s remarks come amid reports that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have made progress this week in talks to resolve a months-long impasse in Congress over another rescue bill. The Democratic controlled House recently passed a $2.2 trillion measure while Republicans have said they favor a roughly $1 trillion package.Any legislation likely would restore at least part of a $600 weekly federal supplement to state unemployment benefits and provide more funding for struggling small businesses and teetering airlines. as well as another wave of checks for most U.S. households.Powell said the $2.2 trillion CARES Act, passed by Congress in the early days of the pandemic, along with a flurry of Fed actions, “have so far supported a strong but incomplete recovery,” with the nation recovering about half the 22 million jobs lost in March and April.Those steps, he added, have “substantially muted the normal recessionary dynamics that occur in a downturn. A typical recession, there’s a downward spiral in which layoffs lead to still lower demand, and subsequent additional layoffs. This dynamic was disrupted by the infusion of funds to households and businesses.”But, Powell added, “There is a risk that the rapid initial gains from reopening may transition to a longer than expected slog back to full recovery as some segments struggle with the pandemic’s continued fallout.”How the Federal Reserve’s interest rates affect the economy and youThe Federal Reserve has lowered interest rates over the past few months. Here’s how their actions affect you.He noted the pace of the recovery has moderated since “the outsized gains in May and June,” with job, income and spending increases all slowing. Meanwhile, more Americans are permanently losing their jobs after millions of furloughed restaurant, retail and other employees were rehired as states have allowed businesses shuttered by the crisis to gradually reopen.There’s a risk that a prolonged slowing in the pace of the recovery “could trigger typical recessionary dynamics, as weakness feeds on weakness. A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy,” such as between low-income and wealthy Americans.Another risk, he said, is that COVID-19 cases “might again rise to levels that more significantly limit economic activity, not to mention the tragic effects on lives and well-being.”“The expansion is still far from complete,” Powell said.In a discussion following his speech, the Fed chief acknowledged that the U.S. budget “is on a sustainable path.” The national debt, swollen further by the pandemic relief measures, is at $27 trillion. But, he added, “This is not the time to give priority to those concerns.” Rather, he said, the nation should work on whittling down the annual budget deficit when the economy is strong.Powell also noted the Fed has taken a series of extraordinary steps to bolster the recovery. Last month, the central bank vowed to keep its key interest rate near zero until the economy reaches full employment and annual inflation runs “moderately” above its 2% goal for some time. Some economists said the pledge would maintain rock-bottom rates until 2024 or later.The market-friendly commitment was consistent with a historic policy shift in August that states Fed officials will no longer preemptively raise rates as unemployment falls to head off a potential surge in inflation. Instead, the central bank will allow inflation to edge above 2% for a time to make up for years of persistently low price increases and spur more job gains during a crisis that has especially hurt low income Americans.In March, during the depths of the pandemic the Fed ‘s slashed its benchmark interest rate to near zero and rolled out a flurry of emergency programs to ease strains in lending markets for corporate bonds; student, auto and credit card loans; and states and cities, among others.