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US economy could ‘easily’ contract 20-30% in Q2: Fed chief

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WASHINGTON (AFP, REUTERS) – The business shutdowns caused by the coronavirus pandemic could "easily" cause the US economy to collapse by 20 to 30 per cent this quarter, Federal Reserve chairman Jerome Powell said on Sunday (May 17).

Although unemployment could peak at 20 to 25 per cent, a level not seen since the 1930s, Powell said the country will avoid another depression.

"I think there's a good chance that there'll be positive growth in the third quarter," Powell told the CBS news programme 60 Minutes.

"Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year," he said. "For the economy to fully recover people will have to be fully confident and that may have to await the arrival of a vaccine."

In the interview, Powell repeatedly returned to health issues as central to the success of a US economic reopening, calling on Americans to "help each other through this" by adhering to social distancing rules as state and local governments begin to lift restrictions on social and economic activities.

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"If we are thoughtful and careful about how we reopen the economy so that people take these social distancing measures forward and try to do what we can not to have another outbreak…then the recovery can begin fairly soon," Powell said.

States are now easing restrictions imposed to slow the spread of the coronavirus. That has raised the hope of a gradual return to normal, but also has increased the risk of new infections. As Congress debates possible further economic relief, Powell has stretched the limits of typical central bank commentary, directly calling for more fiscal spending. In Sunday's interview, he even urged people to wash their hands and wear masks to aid the recovery.

Under the best of circumstances it will be a long road, Powell said, with additional job losses likely through June, a rebound that takes time to "gather steam," and some parts of the economy like the travel and entertainment industries possibly under pressure until there is a vaccine.

In the meantime, he said, the Fed and Congress may need to do more to ensure people can pay their bills. US lawmakers beginning in March Read More – Source