MNI POLICY: Fed's Rosengren Says Reopening Is No 'Panacea'

-- Says Unemployment Likely To Peak Close to 20%

-- Despite Reopening, Health Concerns Could Hold Back Consumers, Investment

By Evan Ryser

     WASHINGTON (MNI) - Boston Fed President Eric Rosengren said Tuesday the

economic shock from the Covid-19 public health crisis cannot be reversed by

businesses simply opening up, and that unemployment could peak at close to 20%. 

     "While allowing employers to reopen will enable some people to return to

work, it is not a panacea for our economic challenges," Rosengren said in

prepared remarks to the New England Council. 

     Since March the Fed has slashed interest rates to near zero, unleashed

unlimited large-scale asset purchases and announced emergency Section 13(3)

facilities providing liquidity and credit. 

     The Boston Fed administers the Money Market Mutual Fund Lending Facility

and will begin the Main Street Lending Program "in the coming weeks," Rosengren

said.  

     Despite historic efforts to provide liquidity and credit to minimize the

economic pain from the pandemic, Rosengren said the unemployment rate will

likely peak at close to 20%. 

     "Unfortunately, even by the end of the year, I expect the unemployment rate

to remain at double-digit levels," the Boston Fed leader said. 

     -- SECOND WAVES

     Even when businesses reopen, many may face diminished demand until

customers once again feel secure leaving their homes. 

     "It is possible that that many households will remain reluctant to spend,

and employees may be reluctant to return to the workplace," said Rosengren, who

is not a voting FOMC member this year. 

     "Public health solutions are paramount - without them, it will be virtually

impossible to return to full employment," he said. 

     The United States has so far not been able to fully halt community spread

of the virus, he said, and "many states are now relaxing restrictions even while

infections and deaths remain a major concern."

     It is important that the sacrifices and progress made so far not be undone,

he said. "This requires that health policy measures limit the risk of second

waves of the pandemic, to the extent possible."

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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