Fed Official Warns Pandemic Response Is Hobbling Economic Rebound
By Nick Timiraos
Boston Fed President Eric Rosengren said a recent slowdown in
U.S. economic activity is likely to persist because of difficulties
states have encountered in suppressing the coronavirus
"Limited or inconsistent efforts by states to control the virus
based on public health guidance are not only placing citizens at
unnecessary risk of severe illness and possible death but are also
likely to prolong the economic downturn," Mr. Rosengren said
Wednesday in remarks prepared for delivery online to the South
Shore Chamber of Commerce in Massachusetts.
Mr. Rosengren said he expected the unemployment rate, which
stood slightly above 10% in July, would be slow to decline given
worsening public-health situations in more states that were quick
to lift lockdown orders in May. Easing restrictions prematurely
"hurt both the economy and public health down the road," he
By contrast, Mr. Rosengren pointed to data on infection and
death rates from Europe, which imposed tighter limits on commercial
activity in the spring and has seen a stronger rebound in economic
activity in recent weeks due to much lower infection rates.
Visits by Europeans to retail and recreation locations have now
created a more robust recovery compared with the U.S., leaving
Europe close to pre-pandemic levels, he said.
Mr. Rosengren didn't make new comments about the outlook for Fed
policy. The central bank cut its short-term benchmark rate to near
zero in March and is buying $120 billion in Treasury and mortgage
bonds per month. Officials have indicated they are likely to hold
rates at their current levels for years.
The Fed has also established a suite of emergency lending
programs to support borrowing for cities, states and businesses.
The Boston Fed is administering the Main Street Lending Program,
which offers loans of at least $250,000 to qualified small and
The Fed will purchase 95% of eligible loans from banks and began
accepting loans last month. Some lawmakers and oversight groups
have criticized the program's slow start -- it purchased 13 loans
valued $92 million through July 31 -- and called the initiative a
Mr. Rosengren said Wednesday he strongly disagreed with that
characterization and expected the program to gradually ramp up as
lenders become more comfortable with it and as the economy faces a
more difficult recovery.
Mr. Rosengren said more than $250 million in loans have been
made under the program, and that an additional $600 million in
loans were in the pipeline. Much of the increase in lending has
occurred recently, he said.
Write to Nick Timiraos at firstname.lastname@example.org
(END) Dow Jones Newswires
August 12, 2020 10:25 ET (14:25 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.