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Powell Suggests the Fed May Lack Ammo to Combat Next Recession

  • Fed chief says it’s important for fiscal policy to help out
  • Powell to speak before Senate Banking Committee at 9:30 a.m.
Jerome Powell speaks in Washington, D.C. on Feb. 11.
Jerome Powell speaks in Washington, D.C. on Feb. 11.Photographer: Andrew Harrer/Bloomberg

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Federal Reserve Chairman Jerome Powell came close to acknowledging that the central bank may not have the firepower to fight the next recession and called on Congress to get ready to help.

The current low level of interest rates “means that it would be important for fiscal policy to support the economy if it weakens,” he told the House Financial Services Committee on Tuesday.

The remark, which came in opening testimony that Powell is due to repeat to a Senate panel on Wednesday, was an unusual appeal by the head of a politically independent institution that is used to combating economic contractions on its own.

But it highlights the difficulties that the Fed and other major central banks face in a world of historically low interest rates and why tax cuts and government spending increases may also be needed to fight future downturns.