Fed officials signal rising caution on U.S. economic recovery amid virus spread
By Jonnelle Marte and Lindsay Dunsmuir
NEW YORK / WASHINGTON (Reuters) - Two Fed officials expressed increasing pessimism about the rapid economic recovery from the novel coronavirus epidemic on Friday, warning that the unemployment rate could rise again if the disease was not brought under control.
The central bank has already made it clear that a complete economic cure for the effects of the virus will take years since it kept the interest rate close to zero at its meeting last week.
However, the emerging signs of a recovery in US economic data with better than expected job growth and retail sales in May had raised some hopes that the US could recover faster.
Fed officials pushed back this view on Friday, warning against reopening the economy too soon after the state blockade ended to contain the virus that killed more than 118,000 Americans.
California, North Carolina, and a number of U.S. cities have made or required mandatory use of masks to deal with spiral corona virus cases on Thursday, as at least six states set daily records.
"This lack of containment could ultimately result in longer downtimes, resulting in lower consumption and investment, and higher unemployment," said Eric Rosengren, president of the Boston Fed, in a virtual event hosted by the Greater Providence Chamber of Commerce was organized.
Minneapolis Fed President Neel Kashkari also said that the economic recovery would take longer than he hoped a few months ago and warned that the recent positive trend in employment growth could soon be reversed if the virus did will not be tamed soon.
"Unfortunately, my baseline scenario is that we'll likely see a second wave of the virus in the US this fall," said Kashkari during a Twitter chat moderated by CBS News. "If there is a second wave, I would expect the unemployment rate to rise again."
SLOW AND SLOW
Earlier this week, Fed chairman Jerome Powell warned in two separate appearances before Congress's lawmakers that millions of people are likely to still be unemployed, even if the economy is on the road to recovery.
Powell, Rosengren and others have all said that more fiscal and monetary support is likely to be needed to help them. Fed Chairman Richard Clarida told Fox Business Network on Friday, "We can do more. I think we will do more."
Clarida added that the potential purchases of Treasury bills or mortgage-backed securities by the Fed are unlimited.
Congress has allocated nearly $ 3 trillion in corona virus-related economic aid, and the Fed has pumped trillions of dollars into the economy to protect it from the aftermath of the epidemic.
However, some Republicans have resisted acting faster, especially given the recent positive economic data.
Powell repeated in a separate appearance on Friday that the economic recovery in the US would not go quickly or smoothly.
"We will find our way back, but it will take time and work ... The way ahead is likely to be a challenge," Powell said during a webcast discussion with local business and community leaders in Youngstown, Ohio, about the construction of a resilient workforce.
"Life and livelihoods have been lost and there is great uncertainty," he said.
(Reporting by Jonnelle Marte and Lindsay Dunsmuir; editing by Andrea Ricci)
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