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 pandemic.

"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 said.

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 midsize businesses.

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 failure.

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


(END) Dow Jones Newswires

August 12, 2020 10:25 ET (14:25 GMT)

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