MNI POLICY: Fed's Kashkari: Be Prepared For Yearlong Weakness

By Greg Quinn

     MINNEAPOLIS (MNI) - Businesses should think about surviving through an

economy facing health restrictions that could last a year instead of counting on

a quick rebound, Minneapolis Fed President Neel Kashkari said Thursday.

     Restaurants just starting to re-open with half their usual tables must

consider getting through more than just the next few months, given the absence

of a vaccine that will wipe out Covid-19, he said on a video conference. 

     "Plan for a long journey," Kashkari said. "Things like the paycheck

protection program are great, they are just a short-term bridge" for a couple

months. "But if we really are not back at full strength for a year or more,

businesses need to prepare for that."

     That's more pessimistic than other Fed officials who say the economy could

start rebounding in the second half of the year and the jobless rate could move

back towards historic lows in 2021. Kashkari said the effective unemployment

rate may hit 24%, and while the U.S. will see "some recovery this year" a

bounce-back is hard to see without a health breakthrough like a vaccine.

     "This is likely going to be a slow recovery, not a v-shaped or quick

return, and it's going to be on a targeted basis, business by business," he

said. "For this region, and for the country, the short term outlook is really

bleak."

     --POLICY TOOLS

     The U.S. has no problem in the short term borrowing the money it needs to

bridge the economy, he said, because global investors prefer its assets over

other nations. "We have the fiscal might to support our economy," he said.

     The Fed also has "more tools available if we need to provide a boost to the

economy," he said.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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