The Federal Reserve chair, Jerome Powell, warned on Tuesday that the US economy faces “significant uncertainty” in the months ahead, and that the recession that has followed in the wake of the coronavirus pandemic could widen income inequality for minorities and those on lower incomes.

Powell said in testimony presented to the Senate banking committee: “Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it. Until the public is confident that the disease is contained, a full recovery is unlikely.”

Powell said recent job losses had fallen hardest on low-income workers, minorities and women and the current downturn further exacerbate income inequality.

“If not contained and reversed, the downturn could further widen gaps in economic wellbeing that the long expansion had made some progress in closing,” Powell said.

Unemployment has shot up since the coronavirus hit the US but has disproportionately hurt low-income workers, minorities and women.

Powell also warned the downturn posed “acute risks to small businesses”. He said: “These businesses are the heart of our economy and often embody the work of generations.”

Congress is weighing further temporary relief for businesses and unemployed workers following its approval of the nearly $3tn Cares Act emergency bailout.

Powell warned that without that aid, the long-term consequences for the economy could be severe.

“The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures,” said Powell. “The Cares Act and other legislation provide direct help to people, businesses and communities. This direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy.”

The Fed chair was speaking amid signs that the US is bouncing back from the worst of the pandemic’s initial impact. On Tuesday, US stock markets rose sharply after the commerce department announced that retail sales had risen 17.7% last month following weeks of lockdown. The rebound erases only a fraction of the historic drops in March and April and comes as coronavirus infractions are picking up across the US.

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