Fed Chair Powell sees 'significant downside risks' in reopening economy

Federal Reserve Chairman Jerome Powell will discuss current issues and challenges facing the U.S. economy on Wednesday. Yahoo Finance’s Brian Cheung shares the details.

Video Transcript

ADAM SHAPIRO: Let's turn our attention to Federal Reserve Chair Jay Powell, and he said this earlier today about negative interest rates.

JEROME POWELL: The committee's view on negative rates really has not changed. This is not something that we're-- that we're looking at. We chose not to implement negative rates during the global financial crisis and the recovery, and instead we relied, as you pointed out, on forward guidance and asset purchases-- asset purchases when we were at the-- near the zero bound. And we've said that we intend to continue relying on those tools, which are tried, and they are now a part of our toolkit.

ADAM SHAPIRO: New Jersey native son Brian Cheung joins us here at Yahoo Finance. He covers the Fed for us. And the chair is actually saying more needs to be done and pointing a finger at Congress, right?

BRIAN CHEUNG: That's right. Chairman Powell speaking this morning. It was his first remarks since the FOMC meeting about two weeks ago. And Chairman Powell really, in that clip that we just played for you, telling everyone that negative interest rates are not something that the Federal Reserve would really consider at this time.

We have to keep in mind that it was only yesterday that President Donald Trump tweeted that he would like the Federal Reserve to take rates below zero, saying it would be a gift, especially to those who are lenders. But Chairman Powell saying that not only is it something that the Federal Reserve is not considering now but the Federal Reserve hasn't considered it even as early as October of last year when all of the FOMC participants, in a very rare consensus, felt that it wasn't appropriate.

A few other things worth mentioning in that speech this morning-- Chairman Powell really laying out a relatively bleak picture of the economic recovery, saying that, you know, all but-- it's going to be anything but a V-shaped recovery. He said that there could be some serious damage to productivity when you consider that there's this widening skills gap among those that are going to be on the sidelines that have been laid off their jobs in addition to weak business investment that could result from the prolonged COVID-19 health crisis.

So Chairman Powell really saying that, yes, even though it's possible that unemployment could spike in next-- in the next month, being the month of May, there could be a concern that the recovery won't be as fast as maybe some Federal Reserve officials had originally hoped.