MNI POLICY: Fed's Rosengren Says Recent Slowdown to Continue

Federal Reserve Bank of Boston President Eric Rosengren on Wednesday called for "continued stimulative monetary and fiscal policy" in the face of a recent slowdown that will likely continue and force an increasing number of the temporary unemployed to face permanent layoffs.

"High-frequency economic data indicate that the recovery may be losing steam, as activities in many states are once again restricted (officially or voluntarily) to slow the virus's spread," Rosengren said in prepared remarks.

The recent slowdown in economic activity "is likely to continue," he said. "Currently, we have an unemployment rate above 10 percent, and because of the continued community spread of the virus, I am concerned that the pandemic will limit the ability of the economy to recover quickly."

Particularly in some parts of the South and the West, where some hospitals are reaching their ICU capacity, changes in behavior are showing up in high frequency data on individuals' mobility and spending, he said in prepared remarks to the South Shore Chamber of Commerce.

"Clearly, continued stimulative monetary and fiscal policy are critical, and most importantly slowing down the COVID-19 infection rate." As long as the virus poses significant threats to public health, Rosengren said, a full economic recovery will be very difficult as individuals, often voluntarily, avoid activities that place their health at risk.

MAIN STREET

As the Fed will be doing all in its power and purview to support the economy, he said, the Main Street lending program is facilitating loans to medium-sized businesses at "a gradual pace of initial activity that is more recently expanding as participants become familiar with the program's parameters."

Main Street, which is administered by the Boston Fed, has more than USD856 million in loans active, with more than USD250 million in loans committed or settled, he said.

There are currently 522 lenders registered in the program, with the greatest number of banks in the USD1-USD10 billion range, with smaller community community banks and larger universal banks also signed up.

"Should the fall bring a resurgence of the virus as many epidemiological models predict, this program may become even more essential," Rosengren said

Despite significant fiscal and monetary stimulus, it cannot "fully offset the economic drain caused by the public health crisis."

The U.S. Congress has been in a stalemate over further fiscal aid that could delay support for weeks.