The Financial Express

US economy to grow more slowly than hoped: Fed official

| Updated: June 25, 2020 10:08:20

File photo used for representational purpose File photo used for representational purpose

The US economy is expected to grow more slowly than people had hoped months ago as the country cannot stop the community spread of Covid-19, a senior US Federal Reserve official said on Monday.

"Some of the better economic data we've been getting has reflected the fact that those places are opening up, but they may not be opening up as safely as they need to," said Eric Rosengren, president of Federal Reserve Bank of Boston, in an interview with Yahoo Finance.

"If the result is that they (officials) have to impose new restrictions later in the year, that actually is going to slow down the economic recovery," he said, noting the economy and the pandemic are "very closely intertwined."

"That is actually my baseline forecast, (which) is that unfortunately we're unlikely to stop the community spread, and we'll be in a situation where the economy is growing more slowly than we might have hoped a few months ago," reports Xinhua citing the Fed official.

Covid-19-related deaths in the United States surpassed 120,000 on Monday with about 2.3 million infections, according to a tally by Johns Hopkins University, and new cases continue rising nationwide.

Rosengren said the central bank's newly launched Main Street Lending Program, which offers small and medium-sized companies loans, could provide "insurance" against what he expects to be a more difficult second half of the year.

"If I'm right the second half of the year is more difficult than many people are anticipating. I think having this facility up and running will be an important insurance policy for the economy," he said.

Rosengren's latest remarks came after a Fed official said Friday that the US unemployment rate will remain in double digits by the end of this year.

"I expect the unemployment rate to still be at double-digit levels at the end of the year, given what are likely to be persistent economic headwinds from the pandemic over the second half of the year," he said.

Since February, US employers have shed nearly 20 million jobs from payrolls, reversing almost 10 years of job gains, according to the Labor Department. The unemployment rate jumped to a post-World War II high of 14.7 per cent in April, and then moved down to a still very elevated 13.3 per cent in May.

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