The Day at a Glance | June 22 2020

FED concerned for recovery

Over the weekend, members of the Federal Reserve expressed concern of a new rise in unemployment figures if the virus is not controlled. Recent figures concerning employment and retail sales have increased hopes of a fast economic recovery in the US, however, members of the FED warned about the risks of a rushed reopening. Eric Rosengren, President of the Boston FED, assured that failure to contain the virus could force many prolonged closures in the future, which could affect consumption, investment and increase unemployment. For Neel Kashkari, of the Minneapolis FED, recovery will be slower than previously anticipated and positive figures seen in the labor market could revert to negative ones if the virus`s spread is not stopped soon. “Unfortunately, my base case scenario is that we will see a second wave of the virus across the US, probably this fall. If there is a second wave, I would expect the unemployment rate to climb again”. As for the central bank`s actions to face these problems, Vice-president of the agency Richard Clarida assured that the FED can still do more to confront the crisis and confirmed that there is no limit to the purchase of bonds and other financial assets, “…there`s more that we can do, I think there`s more that we will do”, he assured in a televised interview. In recent testimonies before the Senate, Jerome Powell, Chairman of the FED, has reiterated that the economy will recover from the crisis, but time and work will be needed: “We will make our way back from this, but it will take time and work…The path ahead is likely to be challenging”. At the moment, markets are betting that the new outbreaks in the US will not force a generalized confinement, which will help maintain a trend of recovery.