Federal Reserve Officials Warn Of Much Slower Economic Recovery Than At First Anticipated

(FamilyRetirementClub.com)- The Federal Reserve is worried that the continued surge of coronavirus cases across the country will cause the American economy to sputter for longer than initially expected.
That’s not to mention a second wave of the virus that is predicted to occur sometime in the fall or winter, which could be very painful for people in the country.
During a virtual event with the National Association for Business Economics, Lael Brainard, the Fed Governor, said:
“The pandemic remains the key driver of the economy’s course. A thick fog of uncertainty still surrounds us, and downside risks predominate.”
Brainard said the Fed should continue providing accommodation through initiatives such as large-scale asset purchases. She also said that more financial support is “vital” to the success of the American economic recovery, especially as the first round of programs from the initial economic stimulus programs are about to expire.
The Federal Reserve has taken some dramatic and aggressive actions since the start of the pandemic to reduce the financial impact across the country. Interest rates were dropped to near zero, as it also launched a bunch of crisis programs that aimed to increase the availability of credit to both businesses and individuals.
Thomas Barkin, the president of the Richmond Federal Reserve, is worried that unemployment in the country could rise once again as confirmed coronavirus cases continue to increase. He warned that businesses could begin to make adjustments based on the belief that the recession will last longer than they initially anticipated — and as money they may have received from the Paycheck Protection Program dries up.
In a webcast with the Charlotte Rotary Club recently, Barkin said:
“A bunch of companies large and small are realizing this is not a two-month issue and recasting their business.”
As a result, the gains that were seen in the last two months could quickly dissipate. Businesses that have been able to retain employees through the use of PPP funds could eventually lay these workers off once the funds evaporate, and as demand is slow to return.
Officials with the Federal Reserve admitted recently that the last economic growth forecasts they made in June didn’t take into account the possibility of a second coronavirus wave. And as the country seems to be in a second surge of the first wave — and not even a second wave yet — there are significant concerns about the health of the economy now and for the near future.
Some states have already begun to hit pause on re-opening efforts, while others have rolled back restrictions, closing businesses such as restaurants and bars that were allowed to open.
Even Fed officials who are more optimistic are sounding a cautious tone. For example, the St. Louis Fed president, James Bullard, said the best-case scenario is an economy that continues to grow through the second half of 2020. But he still cautioned:
“The downside risk is nevertheless substantial, and better execution of a granular, risk-based policy will be critical to keep the economy out of depression.”