Without an effective therapy or a vaccine for the novel coronavirus, the U.S. economy could face 18 months of rolling shutdowns as the outbreak recedes and flares up again, Federal Reserve Bank of Minneapolis President Neel Kashkari said.
“We’re looking around the world. As they relax the economic controls, the virus flares back up again,” Kashkari said Sunday on CBS’s “Face the Nation.” Kashkari is a voter in 2020 on the Fed’s policy-setting Federal Open Market Committee.
“We could have these waves of flareups, controls, flareups and controls until we actually get a therapy or a vaccine. I think we should all be focusing on an 18-month strategy for our health care system and our economy.”
Unemployment has skyrocketed in the U.S. over the last few weeks as state and local governments have ordered businesses to close their doors in a bid to contain the spread of the virus.
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said Sunday on CNN’s “State of the Union” that a partial reopening of the economy could possibly begin in May, but cautioned that the outbreak could flare up again in the fall.
Kashkari warned that “this could be a long hard road that we have ahead of us until we get either to an effective therapy or a vaccine.”
“It’s hard for me to see a V-shaped recovery under that scenario,” he said.
The U.S. central bank has responded aggressively to blunt the effect of the coronavirus pandemic on the U.S. economy, launching an unprecedented range of emergency programs to support as much as $2.3 trillion in loans and slashing interest rates to nearly zero.
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The Fed has more firepower to bring to bear if needed. Cleveland Fed chief Loretta Mester, also a 2020 voter, said Friday that the central bank was “likely not done” in seeking ways to keep credit flowing in the economy.
“We’re always looking for things where if we have a tool to be able to do it, and if we think it’s needed, we’re going to do it,” she told an online forum hosted by the City Club of Cleveland.
The economic pain is already severe. Almost 17 million people have filed for U.S. unemployment benefits in the last three weeks, implying a jobless rate of around 13% or 14%, with output in the second quarter expected to shrink sharply.
Fed Chairman Jerome Powell on Thursday cautioned that the slowdown was striking with “alarming speed” and that unemployment would temporarily hit very high levels.