Central Banks

Tuesday, July 7, 2020 - 10:57

MNI POLICY: Fed's Bostic Says Confidence Is Again Wobbly

By Pedro Nicolaci da Costa

WASHINGTON (MNI) - Early hints of an economic recovery from the Covid-19-led slump are starting to peter out, Atlanta Federal Reserve Bank President Raphael Bostic said Tuesday, indicating some at the central bank are bracing for a more prolonged recession.

More recent data suggest economic activity is "leveling off at a level lower than we were pre-crisis, which might suggest there is going to be some loss or that the time required to recover might be quite a bit longer than we might have otherwise expected," Bostic told a webinar sponsored by the Tennessee Business Roundtable.

Until recently, Fed officials had been expressing confidence in a solid bounceback in the second half of the year after a historic second quarter downturn caused by extensive economic shutdowns.

Bostic said initial signs of confidence among businesses and households appear to be shaky again as infection rates rise around the country.

"There's a real worry that this might go on longer than we had planned for," and there's a possibility that some sectors of the economy, particularly those services most requiring face-to-face interaction or public gathering, "might shrink by 10% to 20%," he said.

Bostic said his business contacts have said the pandemic has accelerated the push toward automation in businesses like restaurants.

Minutes from the Fed's June meeting showed a number of participants worried "there was a substantial likelihood of additional waves of outbreaks, which, in some scenarios, could result in further economic disruptions and possibly a protracted period of reduced economic activity."

--MNI Washington Bureau; +1 202 371 2121; email: pedro.dacosta@marketnews.com


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