Fed Chair Powell Says Covid-19 Still a Threat to the US Economy

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Key Takeaways

• Jerome Powell, Fed Chairman, says it’s unclear how the Delta strain would affect the economy
• US futures turn negative after a Tuesday’s session ends in the red for all three major indexes

Fed Chair Powell Says Covid-19 Still a Threat

Federal Reserve Chairman Jerome Powell said the US central bank is yet to see what the implications of the Delta strain would be for the US economy. Speaking at an online question-and-answer town hall with students and teachers on Tuesday, Mr. Powell offered his views on the relationship between the recent Covid-19 surge and economic activity but provided no comments on the outlook for monetary policy.

“It’s not yet clear whether the Delta strain will have important effects on the economy; we’ll have to see about that,” he said during the virtual event held by the Federal Reserve.

The Fed Chair did not speak about the next steps toward monetary policy changes or a potential timeline for reducing the central bank’s asset purchases. He stressed, however, that the economic recovery is not yet complete. “The Covid pandemic is still casting a shadow on economic activity. It is still very much with us. We can’t, you know, we can’t declare victory yet on that,” he commented.

Looking ahead, Mr. Powell gave a broad perspective about how he viewed the economy in the foreseeable future. “We’re not simply going back to the economy that we had before the pandemic,” he mentioned. “We need to watch carefully as the economy continues to get through the pandemic and try to understand the ways that the economy has changed and what the implications are for our policy.”

European Markets Trade Sideways

Fed Chair Powell’s comments came before the release of the minutes from the Fed’s latest policy meeting later today. The market will be closely watching the meeting summary as it could potentially hold key insight into the central bank’s plans to unwind its ample monetary stimulus that has been buoying the US economy for the last 17 months.

US stock futures are floating relatively unchanged but slightly in the red in pre-market trading today. The quiet stock movements ahead of the regular session follow a steep single-day selloff in the major US equity benchmarks.

On Tuesday, Wall Street registered its worst day in three weeks as market participants retreated their bets on stocks across the board after weak US retail sales data. The broad-based S&P500 closed down 0.71% at 4,448.08 and ended a five-day winning stretch.

The 30-stock Dow Jones Industrial Average declined 0.79% and finished the session at 35,343.28. The blue-chip Dow also snapped a five-day run to a record close a day earlier. The Nasdaq Composite extended its slide for another day and closed the day lower by 0.93% to 14,656.18.

The Commerce Department on Tuesday reported that US retail sales figures fell 1.1% in July, compared to June. The drop was more than the 0.3% decline expected by economists.

Across the Atlantic, European markets traded mostly sideways. Europe’s Stoxx 600 ended the day virtually flat, gaining 0.07%, or 0.33 points, to 473.78. The pan-continental stock gauge had snapped a 10-day winning streak in the previous session. The major stock averages of Germany, Spain, and France closed in the red, while UK’s FTSE100 added 0.38% on the news that miner BHP Group will shift its primary stock market listing from the UK to Australia.

European bourses in early trading on Wednesday gravitated toward unchanged levels.

Cryptocurrencies today attempt to pare early-week losses. Bitcoin is now trading relatively unchanged at levels near $45,000. Over the past couple of days, the flagship digital coin lost about 3.7% of its value.