Ex-Fed Chair Janet Yellen says extraordinary stimulus is needed so long as the pandemic presents an economic threat

• Additional fiscal stimulus is needed to keep the economic recovery on track, former Federal Reserve Chair Janet Yellen said Monday.
• The central bank “has already done a huge amount,” and now Congress needs to pick up the slack, she said on Bloomberg TV.
• “While the pandemic is still seriously affecting the economy, we need to continue extraordinary fiscal support,” she added.
• Yellen also echoed current Fed Chair Jerome Powell in noting that the path of the US economy hinges on the path of the virus. The country should push for more testing and improved contact tracing to better contain the pandemic, she said.
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Former Federal Reserve Chair Janet Yellen on Monday joined the throngs of investors, economists, and legislators calling for more fiscal stimulus.

The $2.2 trillion CARES Act and other spending measures were “impressive” and played a major role in starting the US economic recovery, Yellen said on Bloomberg TV. Yet that fiscal relief has expired and the Fed “has already done a huge amount” to keep its support in place. Congress needs to pick up the slack to ensure the nation’s rebound stays on track, Yellen said.

“There are some limits [to monetary policy] and it’s important for fiscal policy to fill in that gap,” the former Fed chief said. “While the pandemic is still seriously affecting the economy, we need to continue extraordinary fiscal support.”

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The remarks echo statements from current chair Jerome Powell and regional Fed presidents. Officials have repeatedly urged Congress to approve new aid, emphasizing the Fed’s ability to lend, not spend.

Yet months of talks between Democrats and the White House yielded little progress. The two parties remain stuck in negotiations despite House Speaker Nancy Pelosi imposing on Sunday a 48-hour deadline for talks. Even if the White House reaches a compromise with House Democrats, Senate Republicans are poised to kill the bill.

Yellen also repeated Powell’s warnings that the path of the US recovery hinges on its containment of the coronavirus. While President Donald Trump continues to downplay the virus and praise a V-shaped bounce-back, his Fed chair has cautioned that a resurgence of COVID-19 cases could derail the economic rebound.

Efforts including increased testing, contact tracing, and mask-wearing will play a critical role in bringing the US back to pre-pandemic levels of growth, Yellen said.

“We need a much more effective effort than we’ve had. If we had that it would be good not only for health but for being able to open up the economy, and we’ve seen that in countries ranging from Germany to Korea to China that have been successful,” she said.

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