Powell Says Economy Will Remain Difficult for Months Despite Vaccine Development Speed

US, European, and UK Central Bank Governors Speak at ECB Annual Forum Panel Discussion
Considering Mass Production and Distribution Following Vaccine Development... "Uncertainty Remains"

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed)
[Photo by AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] "The coming months will be a critical period."

Despite news that the development of a vaccine for the novel coronavirus infection (COVID-19) has taken a step forward, major central bank governors in the United States, Europe, and the United Kingdom remain cautious. This is because even if vaccine development succeeds, there is still a long way to go for mass production and distribution, making it difficult to expect a short-term economic recovery. On the contrary, they pointed out the re-spreading of COVID-19 around the world as a "major risk to the economy."

According to AP News and others on the 12th (local time), Jerome Powell, Chair of the U.S. Federal Reserve (Fed), Christine Lagarde, President of the European Central Bank (ECB), and Andrew Bailey, Governor of the Bank of England (BOE), shared a common response of "uncertainty remains" regarding recent vaccine developments during a panel discussion at the ECB Annual Forum held via video conference that day.

Chairman Powell referred to the news that the vaccine being developed by U.S. pharmaceutical company Pfizer and German BioNTech showed over 90% effectiveness, saying, "It is certainly good and welcome news in the medium term," but he also pointed out that considerable uncertainty remains regarding the timing of development, production, distribution, and effectiveness. He said, "At this point, it is too early to assess how this news will affect the future economic trajectory, especially in the short term," and forecasted that "the economy could face difficulties in the coming months." One foreign media outlet evaluated this as "a call for short-term public support to help overcome the valley on the path to recovery."

President Lagarde also said, "The COVID-19 pandemic has created a great river of uncertainty," and added, "Since uncertainty still remains regarding vaccine production and distribution, I hope people will not get overly excited about vaccination issues." Governor Bailey also said, "(The vaccine development news) is certainly good news, but the vaccine is not here yet," adding, "We live in a world of tremendous uncertainty and unpredictability."

The reason central bank governors are taking a cautious stance is that the economic damage caused by COVID-19 is expected to last longer than anticipated. They emphasized that additional fiscal and monetary policies are necessary to endure this. President Lagarde said, "Fiscal and monetary policies will play a very helpful role as a bridge connecting the river while continuously supporting the economy," and indicated that additional measures are expected to be announced at the ECB monetary policy meeting next month.

Chairman Powell revealed that during the Federal Open Market Committee (FOMC) meeting on the 4th and 5th, they discussed ways to further stimulate the economy through asset purchase programs. On that day, the U.S. Treasury Department disclosed that the government fiscal deficit for October, the start of the 2021 fiscal year, increased by 111% compared to the same period last year, reaching $284 billion. Despite the significant fiscal damage, Chairman Powell has repeatedly mentioned that Congress must reach an agreement to introduce additional economic stimulus measures to prevent economic agents from collapsing.

Despite the worsening economic situation, the three central bank governors expressed satisfaction that private banks are holding up well in the crisis. Governor Bailey said, "We wanted the banks to help the economy, not the economy to help the banking system," and added, "It seems we are seeing that now."

Chairman Powell predicted that even if COVID-19 is resolved with a vaccine, the economy will find it difficult to return to its previous state. He said, "We will not return to the same economy as before COVID-19," adding, "We are recovering but moving toward a different economy." He expressed concern that "technology will be used more, and as a result, more workers will face difficulties," warning that relatively low-wage workers such as women and minorities will suffer more damage.

This content was produced with the assistance of AI translation services.