New York Fed President John Williams dismissed the idea of negative rates again and said “we have other tools that I think are more effective and more powerful to stimulate the economy”. He added, “I don’t think negative rates is something that makes sense given the situation we’re in because we have these other tools that can be used,” referring to the low interest rates, forward guidance and the balance sheet. Regarding the economy, “over time, the biggest question mark is how the consumer is going to behave,” Williams said. “How long will people take to really want to take advantage of tourism and other things.”
Separately, Dallas Fed President Robert Kaplan said he expected growth in H2 and 2021. His forecasts are based on assumption that consumers would travel, eat out and broadly re-engage in the economy again. But risks are to the downside if the US doesn’t ramp up coronavirus testing. His baseline is that unemployment rate would fall to 10-11% by year-end and dip further to below 7% by end of 2021.
