The chairman of the Federal Reserve says the US economy could “easily” contract by 20-30% amid the pandemic.
Jerome Powell added in a CBS interview that the economic downturn might last until late 2021, and a full rebound may not be happen until a vaccine is found.
However, he expressed confidence the economy would recover, and said he would never bet against the US economy.
Earlier this week, Mr Powell had called on US lawmakers to pass more economic stimulus and relief aid.
More than 36 million Americans have filed for unemployment benefits since mid-March.
How worried should we be?
In an interview with CBS’ 60 minutes, Mr Powell said: “This is a time of great suffering and difficulty… you can’t really put into words the pain people are feeling.
“This economy will recover. It may take a while,” he said. “It could stretch through the end of next year. We really don’t know.”
Unemployment could potentially peak at 25%, and “the lowest paid people” – particularly women – were being hurt worst by the downturn, he added.
However, he said he believed the US could avoid a depression – a sustained economic downturn – because the financial system itself was healthy, and the coronavirus pandemic was “an outside event” the economy could recover from.
While the economy could “easily” contract 20-30% this quarter, he expected the economy to “recover steadily through the second half of this year”, as long as the country could avoid “a second wave of the coronavirus”.
“It’s very important to avoid that… that would be quite damaging to the economy and also to public confidence.”
The interview, which was recorded on 13 May, aired on Sunday evening.
The US has already approved nearly $3 trillion (£2.5tn) in new stimulus spending – packages worth an estimated 14% of the country’s economy. The Fed has also taken radical steps to shore up the economy, pumping trillions of dollars into the financial system.
On Friday, Democrats in the House of Representatives passed an additional $3tn coronavirus relief package. However, it is not expected to pass the Republican-majority Senate, where leader Mitch McConnell has argued there is “no urgency” to act.
‘We’ve got to get this economy open’
Meanwhile, US Health and Human Services Secretary Alex Azar has defended the decision by most states to begin lifting the lockdown measures.
He told CNN on Sunday that the decisions should be made by local leaders, because “in almost half of our reporting counties, we have had not a single death”, and over 50% of cases came from just 2% of those counties.
Only 14 US states have met the federal recommended guidelines for reopening – which suggest a decline in new cases daily for two weeks – according to a study by Reuters.
Mr Azar said he disagreed with White House trade adviser Peter Navarro, who said earlier on Sunday that the Centers for Disease Control and Prevention (CDC) “really let the country down with the testing”.
“I don’t believe the CDC let this country down,” Mr Azar responded. “I believe the CDC serves an important public health role and what was always critical was to get the private sector to the table.”
Test kits sent out to states by the CDC in February were found to be faulty, leading to criticism of the CDC’s role in the crisis.
Mr Azar added that he was not concerned by images of people in bars not practicing social distancing.
“I think in any individual instance you are going to see people doing things that are irresponsible,” he said. “We’ve got to get this economy open and our people out and about, working and going to school again.”
What is the current death toll?
There are more than 1.4 million cases of Covid-19 in the US, and 89,000 deaths, according to Johns Hopkins University.
On Saturday, Texas reported its largest one-day spike in new cases since the pandemic began, with 1,801 new infections.
It comes after the governor allowed all retail businesses to reopen on 1 May, but with restrictions on capacity.
Thirty-three more people died on Saturday, bringing the state-wide death toll to 1,305.