Federal Reserve officials have expressed concern over new waves of coronavirus infections disrupting the economic recovery and causing further unemployment growth and a worse economic recession, according to a report by the central bank on Wednesday. it’s meeting from June 9 to 10.
Fed President Jerome H. Powell has repeatedly said that coming out of this recession will depend on getting the virus under control and on Americans’ confidence to return to work and normal expenses.
But the notes from the two-day meeting reveal how interconnected Fed officials see a prolonged economic downturn with the continuing spread of the pandemic.
“Given the significant uncertainty and downside risks associated with the pandemic, including how weak the economy would be and how long it would take to recover, staff felt that a more pessimistic projection was no less plausible than the baseline forecast “, minutes read.
“In this scenario, the second wave of coronavirus epidemics, with another set of strict limitations on social interactions and business operations, was to start later this year, resulting in a drop in real GDP, an unemployment rate and further downward pressure on inflation next year.
In particular, the Fed’s discussion of these concerns took place before the sharp increase in coronavirus cases recovered in the past two weeks.
Yet his concerns are very different from the White House forecasts, with President Trump predicting a sharp increase in economic growth.
Powell was hesitant to say precisely what type of recovery, including a V, U or W recovery, the country could face. But the Fed has taken steps to incorporate a range of possibilities, including the most serious, into its emergency response.
Last week, the Federal Reserve released new data on how the country’s largest banks would fare in these three scenarios, concluding that if there was a slower U-shaped recovery or a W-shaped scenario, several financial companies “they would approach minimum capital levels.”