The U.S. economy could feel the weight of consumer fear and social distancing for a year or more in a prolonged climb from a deepening hole says the head of the Federal Reserve.

After a two-day policy meeting in which the U.S. central bank kept interest rates near zero and promised to expand emergency programs as needed to help the battered economy, Fed Chair Jerome Powell offered no sanguine words about how fast the country might return - if ever - to the near-record low unemployment and solid growth of just a few weeks ago.

A first phase of a recovery may actually happen soon, Powell told journalists in a videoconference after the end of the policy meeting, as some U.S. states allow stores and even restaurants to reopen under tightened rules meant to sustain progress in curbing a pandemic that has killed more than 60,000 people in the country.

But even if that takes hold by late summer, “that’s the period as well that creates the risks of new outbreaks of the virus,” Powell said, a scenario that health officials and economic analysts say could leave the economy in a recurring cycle of tentative reopenings followed by reimposed restrictions to fight new outbreaks.

As the easing of social distancing rules proceeds, “people will come out of their homes, start to spend again, we will see unemployment go down, we will see economic activity pick up,” Powell said. “That could be a large increase ... It is unlikely it will bring us quickly back to pre-crisis levels.”

“Trying to be really precise about when that might happen and what the numbers might look like - it is very tough to do that.”

 “We are doing all we can” to help American households and businesses weather the public health emergency, Powell told journalists after the end of the policy meeting, which was also held via videoconference.

“We will continue to use our tools to ensure that the recovery, when it comes, will be as robust as possible,” Powell said, specifically noting the Fed’s willingness to set up even more, and riskier, lending programs than it already has if the U.S. Treasury agrees.

The U.S. central bank has already slashed interest rates to zero, and it reiterated on Wednesday they will stay there until the economy is clearly back on track. It has also rolled out around $2 trillion in lending commitments, and Powell said it was ready to do more as needed.

In the meantime, new programs to buy corporate bonds and lend to mid-sized companies are in the end stages of development and will be ready “soon,” Powell said.

Source- Reuters