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RPT:MNI POLICY: SF Fed: Several Years Before Econ At Potential

Repeats Story Initially Transmitted at 22:37 GMT Jul 13/18:37 EST Jul 13
By Greg Quinn
     SAN FRANCISCO (MNI) - Following are highlights of the San Francisco
"FedViews" report published Monday:
     Thomas M. Mertens, vice president at the Federal Reserve Bank of San
Francisco, stated his views on the current economy and the outlook as of July 9,
     *Gross domestic product fell by 5% at an annualized rate during the first
quarter of 2020, and we expect a substantially larger decline in the second
     *Barring a major second wave of infections, the U.S. economy should start
its recovery during the second half of the year. But it will likely take a few
years until the U.S. economy has fully caught up with its potential. A
pronounced second wave, however, would likely lead to a deterioration of the
overall economic outlook and delay recovery. Overall risks are currently tilting
towards the downside. 
     *Over the next few years, we foresee a gradual decrease in unemployment,
reaching a level of around 6% by the end of 2022, still well above the levels
prior to the pandemic's onset. 
     *We expect inflation rates to remain below the Federal Open Market
Committee's (FOMC's) 2% target rate in the near term and increase gradually
toward the target once the recovery is under way. 
     *The two-year Treasury yield is currently trading within the target range
of the federal funds rate, indicating that investors expect the policy rate to
stay at the lower bound for an extended period of time. 
--MNI Ottawa Bureau; +1 613-314-9647; email:

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