Fed's Evans Sees Coronavirus Casting a Long Shadow on Economy
April 08 2020 - 2:29PM
Dow Jones News
By Michael S. Derby
Federal Reserve Bank of Chicago President Charles Evans said
he's expecting substantial economic pain during the second quarter
due to the coronavirus crisis and warned that because companies and
households are expending savings and other resources to hold on,
that could weigh down a hoped for recovery.
"It's important to remember that we entered this crisis with
solid economic fundamentals. We have a good base to build on," Mr.
Evans said on Wednesday in video remarks to a gathering of the
Economic Club of Chicago. But he added "the economic downturn will
be deep. There's no getting away from that," adding the longer the
crisis goes on, the greater the risks to the outlook.
Mr. Evans said that whatever happens, the economy -- which he
still hopes will be able to mount a quick recovery with Fed and
government support -- will look different and likely weaker.
"Even under a best case scenario, the U.S. and global economy
will be less prosperous coming out of this crisis than we were
going into it," Mr. Evans said. "We are all using valuable
resources and savings that we had intended to use for other
aspirations" and to ensure that the trouble is not longer-lasting,
"it seems likely that additional resources will be required to
navigate through the next several months and beyond."
"The United States has already committed trillions of dollars in
welcome federal fiscal packages in relief support to the public.
But even more action would be valuable," the official said. He also
noted more support to small businesses beyond current stimulus
programs is probably necessary.
Mr. Evans, who is not currently a voting member of the
rate-setting Federal Open Market Committee, said that the nature of
the current crisis is so stark that he and other Fed officials are
already willing to call the troubles what they are: a
recession.
"Historically, people in the Fed wouldn't mention recession
until it was absolutely officially determined," Mr. Evans said.
But, "this is such a severe downturn, the unemployment rate is
going to go up to double digits, it was just very clear that a lot
of relief economic relief and stimulus was called for."
He does think more may be needed on the fiscal front, especially
in terms of credit to small firms. And right now, the key thing is
keeping people and companies afloat until the pandemic
subsidies.
"If we can get as many business employment relationships held
together into the second half of this year, and households able to
make enough payments and find a way forward, then we can start
seeing what does the future looks like, what is our growth path,"
Mr. Evans said.
In his speech, Mr. Evans appeared to largely view the central
bank's job now as one of execution for its already launched
efforts, which he sees as critical to bridge the crisis period, and
he didn't say what else he'd like the Fed to do.
Write to Michael S. Derby at
michael.derby@wsj.com<mailto:michael.derby@wsj.com>
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
April 08, 2020 14:14 ET (18:14 GMT)
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