WASHINGTON (Reuters) – The US economy may experience a slower than expected recovery due to a resurgence of the coronavirus epidemic in the United States which could worsen the economic situation, Federal Reserve officials warned on Tuesday ( Fed).
One after the other, members of the American central bank have been more pessimistic in recent days about the economic outlook, warning that the recent improvement in indicators, particularly on employment, may not last.
“The pandemic remains the main engine of economic development. A thick fog of uncertainty still surrounds us, and the downside risks prevail,” Lael Brainard, one of the governors of the Fed, said on Tuesday a speech at an event organized by the National Association for Business Economics.
She called on the Fed to provide lasting monetary support through forward guidance and massive asset purchases, and said additional budget support would be “vital” for strength. of recovery.
Meanwhile, Richmond Fed President Thomas Barkin warned that unemployment in the United States may rise again as businesses adjust to a recession likely to be longer than expected.
“A set of companies, large and small, realize that it is not a problem of two months and are reshuffling their activities”, which could jeopardize the rebound seen in the last two months on the front of the job, he said in a webcast address to the Charlotte Rotary Club.
In addition, small businesses benefiting from the Payckeck Protection program, aimed at distributing loans to companies affected by the coronavirus, retained their employees to comply with the loan forgiveness conditions. As the program expires, they can now consider layoffs.
Fed officials first hoped that the coronavirus epidemic would be quickly brought under control in the United States to allow the economy to rebound. They admitted that the forecasts for economic growth made at the last central bank monetary policy meeting in June largely ignored the possibility of a second epidemic wave.
A more “granular” health strategy, including the ubiquitous use of masks, is necessary to avoid a possible economic depression, said chairman of the St. Louis Federal Reserve, James Bullard, on Tuesday.
According to his basic assumption, the American economy should continue to grow during the second half of the year. But “the downside risk is nonetheless significant, and better execution of a granular, risk-based policy will be essential to keep the economy out of the depression,” he said.