Tue, Apr 14, 2020 page10

• US faces ‘long, hard road’: Fed’s Kashkari

  ‘WAVES OF FLARE-UPS’: Kashkari said an 18-month strategy would be needed to address the pandemic and that small businesses would need additional support

  • Reuters
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  The US’ economic recovery from the disruptions caused by the novel coronavirus outbreak would likely be a “long, hard road” in which some parts of the economy would periodically shut down and restart, US Federal Reserve Bank of Minneapolis President Neel Kashkari said on Sunday.

  In an interview on CBS’ Face the Nation, Kashkari said that projections for a quick economic turnaround were overly optimistic unless a treatment for COVID-19, the disease caused by the coronavirus, became available in the next few months.

  “This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine,” a CBS transcript quoted him as saying. “It’s hard for me to see a V-shaped recovery under that scenario.”

  Kashkari is a voter this year on the Fed’s policy-setting Federal Open Market Committee. His comments came amid signals from US President Donald Trump that he wants to reopen the economy as soon as possible.

  Trump on Friday said that he would unveil a new advisory group this week that would focus on the process of economic opening.

  Unemployment has skyrocketed in the US over the past few weeks as state and local governments have ordered businesses to close their doors in a bid to contain the spread of the virus.

  Public health experts have warned that the US death toll could surge to 200,000 over the summer, from 21,300 on Sunday, if unprecedented stay-at-home orders that have closed businesses and kept most Americans indoors are lifted when they expire at the end of the month.

  Kashkari said that additional support is needed for small businesses beyond the US$350 billion provided in the coronavirus aid package passed in last month, but he was optimistic that the US Congress would approve more funding.

  He added that he was looking toward an 18-month strategy to address the health and economic effects of the pandemic.

  During that time, certain parts of the economy might close and reopen on a rolling basis, starting with workers who are at the lowest risk of infection, he said.

  “We could have these waves of flare-ups, controls, flare-ups and controls until we actually get a therapy or a vaccine,” Kashkari said.

  “It’s hard for me to see a V-shaped recovery under that scenario,” he said.

  The US central bank has responded aggressively to blunt the effect of the coronavirus pandemic on the US economy, launching an unprecedented range of emergency programs to support as much as US$2.3 trillion in loans and slashing interest rates to nearly zero.

  The Fed has more firepower to bring to bear if needed. Federal Reserve Bank of Cleveland President Loretta Mester, also a voter this year, said on Friday that the central bank was “likely not done” in seeking ways to keep credit flowing in the economy.

  “We’re always looking for things where if we have a tool to be able to do it, and if we think it’s needed, we’re going to do it,” she told an online forum hosted by the City Club of Cleveland.

  Additional reporting by Bloomberg
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