America’s two top economic policymakers will warn lawmakers on Tuesday that the Delta variant of the coronavirus has slowed the economic recovery, but will, according to prepared comments, radiate optimism about the overall trajectory of the economy.
Treasury Secretary Janet L. Yellen and Federal Reserve Chair Jerome H. Powell will testify before the Senate Banking Committee as the U.S. economy finds itself at a crossroads, with companies facing labor and consumer shortages dealing with rising prices amid a resurgent pandemic. Congress is also grappling with a host of legislative challenges in the coming days, all of which could have an impact on the economy. They include expanding federal funding to avoid a US government shutdown, raising the debt cap to avoid defaulting on the country’s financial obligations, and passing the infrastructure and social safety net packages. from President Biden.
“While our economy continues to grow and recover a significant portion of the jobs lost in 2020, the significant challenges of the Delta variant continue to hold back the speed of recovery and pose significant barriers to a vibrant economy,” said Ms Yellen . to her prepared remarks. “However, I remain optimistic about the trajectory of our economy in the medium term, and I expect we will be back to full employment next year.”
The testimony will provide Ms. Yellen and Mr. Powell with an opportunity to publicly urge lawmakers to take action to raise or suspend the country’s borrowing limit and warn of the catastrophic consequences if the United States fails to meet its obligations. Ms Yellen has warned that the debt crisis is eroding confidence in the United States and that a bankruptcy, which could happen as early as mid-October, would cause irreparable damage to the economy.
For weeks, Ms Yellen has been quietly urging lawmakers to put politics aside and ensure the United States can continue to meet its tax obligations. She’s been in touch with Wall Street executives and former treasury secretaries as she tries to keep the markets calm and find allies to help her defend the case against unruly Republicans, who believe Democrats should solve the debt cap alone.
“It is imperative that Congress tackle the debt limit quickly,” Ms Yellen will say. “The entire confidence and creditworthiness of the United States would be affected, and our country would likely face a financial crisis and economic recession.”
Mr. Powell will tell senators that the Fed will continue to support the economy with its monetary policy, which affects how expensive it is to borrow and spend. But he will also make it clear that Fed officials will act if a recent rise in prices continues.
“Inflation is high and likely to remain so in the coming months before moderating,” Mr Powell is prepared to say, based on comments released Monday afternoon.
According to his prepared statement, he will cite the ongoing coronavirus pandemic as a risk to the economic outlook.
Mr Powell has also been concerned about the debt cap in recent weeks, saying at a news conference last week that default is “just not something we should consider” and that “no one should assume that the Fed or anyone else is going to hurt the markets or the economy.” in the event of a failure, fully protect in the event of a failure to ensure that we pay those debts when they are due.”
Ms. Yellen and Mr. Powell will testify again before the House Financial Services Committee on Thursday.