By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) - A slowing recovery and a surging pandemic mean the United States is entering a "challenging" few months, with the potential deployment of a vaccine still facing the hurdles of production and mass distribution before its impact on the economy becomes clear, Fed chair Jerome Powell said on Monday.
"The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months," Powell said in remarks prepared for delivery to a congressional hearing on Tuesday morning.
"Recent news on the vaccine front is very positive for the medium term. For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups. It remains difficult to assess the timing and scope of the economic implications of these developments with any degree of confidence."
Powell's remarks are his most detailed yet on how the potential arrival of a vaccine may influence the Fed's outlook, and the evolution of a recovery that the Fed chair acknowledged is slowing.
That, in turn, could shape opinions about how much more government support may be needed to help families and businesses bridge the gap between the current recession and the post-pandemic economy.
Vaccinations could begin before Christmas, U.S. Health Secretary Alex Azar said on Monday. [L1N2IG1LN]
In separate testimony to be delivered at the same hearing, Treasury Secretary Steven Mnuchin said the economy had made "remarkable progress" recovering ground lost due to the pandemic, and that any further government help should be targeted to "workers and small businesses that continue to struggle," as opposed to spread broadly in the economy.
Mnuchin recently told the Fed to shut down several emergency lending programs, and suggested that $455 billion remaining for those facilities be reallocated for such a program.
With the vaccine on the horizon, some analysts say they expect a strong bounce in the economy in coming months as Americans are inoculated and broad immunity to the coronavirus is achieved.
However, Powell said the fate of the economy will remain hinged to the success of that process, and until then the impact of the pandemic will remain - and fall particularly hard on women, minority groups and those in the service sector.
"A full economic recovery is unlikely until people are confident that it is safe to re-engage in a broad range of activities," Powell said.