(Bloomberg) -- Federal Reserve Chair Jerome Powell and U.S. Treasury Secretary Steven Mnuchin face a second day of questioning Wednesday by lawmakers about government support for the U.S. economy as signs appear of a possible deal on more stimulus.
Proposals emerged Tuesday to break the deadlock over additional aid, reflecting the rising concerns that the economy needs another boost. Covid-19 cases are surging, threatening the fledgling recovery and causing more states to announce restrictions on business activity.
Powell and his colleagues at the Fed have been advocating for months for more government stimulus -- noting that monetary policy can only do so much. The central bank slashed its benchmark interest rate in March to near zero and has held it there since.
Wednesday’s hearing is before the House Financial Services Committee.Powell’s testimony Tuesday before the Senate highlighted the difficulties faced by unemployed workers and small businesses.
“The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months,” Powell said. “The outlook for the economy is extraordinarily uncertain and will depend, in large part, on the success of efforts to keep the virus in check.”
In their testimony Tuesday, Powell and U.S. Treasury Secretary Steven Mnuchin both backed more fiscal stimulus to bridge the economy through the next few months of the pandemic as the promise of Covid-19 vaccines looms.
Powell gave no indication how the central bank may respond to the risk of fading economic momentum when it meets Dec. 15-16, though he reiterated that it would use all of its tools to help the economy recover.
House Democrats are expected to further challenge Mnuchin Wednesday over his decision to let several emergency lending programs set up by the Federal Reserve, and backed by the Treasury, expire at the end of the year.
Powell said the central bank would return unused funds but would have preferred to keep the programs open to new loans as a backstop in case the economic crisis worsens.
The joint appearance of Powell and Mnuchin is likely one of the last reports both will give to Congress. While President Donald Trump has yet to concede, President-elect Joe Biden formally announced his pick for a new Treasury Secretary -- Janet Yellen -- on Tuesday.
Yellen is a former Fed chair and expected to strengthen coordination between the two agencies to sustain the fledgling economic recovery once confirmed to the position.
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