Fed Vice Chair Richard Clarida said the US is living through “the most severe contraction in activity and surge in unemployment that we’ve seen in our lifetimes”. Unemployment rate is going to “surge to numbers that we’ve not seen probably since the 1940s.” But he’s expecting recovery to begin in H2 as his baseline forecast. Still “the course of the economy is really going to depend on the course of the virus and the mitigation efforts”.
Clarida emphasized that Fed is going to “continue to be forceful, proactive and aggressive until we’re confident that the economy is on the road to recovery, especially for Main Street”. At the same that, “fiscal policy also plays an essential role,” he said, “because the Fed has lending authority but not spending authority. We can lend money but we can’t transfer income to households and firms.”
Chicago Fed President Charles Evans said it’s “reasonable” to expect the economy to return to growth in H2. But the baseline scenario “involves a lot of things going right”. Also, “the pickup in activity will likely be slow at first, because of continued social distancing and other safety precautions”. Regarding Fed’s policy, Evans believed it’s unnecessary to put stronger forward guidance because “I can’t imagine that anybody is expecting the Fed to raise the interest rates over any relevant time horizon,”
Atlanta Fed President Raphael Bostic said there are “lots of difference possibilities” regarding the upcoming economic recovery. But, “in many communities the ‘V’ recovery is going to be very difficult to achieve.” “Across the country there has been a fair amount of diversity of experiences, diversity of vulnerability, and that will translate into diversity of recoveries,” he added.
