By Michael S. Derby
Coins are in short supply in the U.S. and the central bank is working to fix the situation, Federal Reserve Chairman Jerome Powell said.
Speaking Wednesday before the House Financial Services Committee as part of broader testimony on the outlook for the economy and monetary policy, the Fed leader tied the coin shortage to the broader fate of the economy as businesses and consumers navigate the coronavirus pandemic.
"With the partial closure of the economy, the flow of coins through the economy has gotten all...it's kind of stopped," Mr. Powell said. "We are well aware of this and are working with the Mint and we are working with the reserve banks. And as the economy reopens, we are seeing coins begin to move around again.
"We feel like we are making progress" in fixing the situation, Mr. Powell added.
On Monday, the Fed said in a press release that coin production and distribution activities had been significantly hampered by the coronavirus pandemic, leading to a de facto rationing of what banks could obtain for their customers. Although production has been curtailed, demand has been rising as the nation reopens, which has led to the shortage, the Fed said.
Coins are produced by the U.S. Mint but distributed to banks as part of services provided by the Fed.
The U.S. Mint and Treasury Department didn't immediately respond to a request for additional details about the coin shortage. A Fed spokesperson said that coin deposits from banks are down by approximately 50% in year-over-year volume since the start of the pandemic in March.
The problem with getting coins out to those who want them comes in a climate where demand for physical money has surged in the U.S. Details on coin usage are relatively scarce.
But demand for currency overall has surged: On an annual basis, currency in circulation has roughly doubled between February and May, according to Fed data. As of June 10, currency in circulation totaled just under $2 trillion.
Some Fed officials have said the surge in demand for cash isn't surprising and mirrors other periods of stress, when households and others seek to hold more physical money in case of problems accessing banks or cash machines.
Coins would almost certainly be a minor consideration in all of this. But even as electronic payments dominate money usage and banking in the U.S., the use of physical money is still significant, and it can matter most to lower-income people and minorities, some of whom lack bank accounts. For some, the inability to make exact change could be a real issue.
Earlier this year, Mr. Powell, pushing back against efforts to get the Fed to create its own rival to bitcoin and other electronic currencies, said cash was still very important, noting, "cash in the U.S. economy continues to grow faster than nominal" gross domestic product.
Write to Michael S. Derby at firstname.lastname@example.org