Central Banks

Monday, July 13, 2020 - 15:49

MNI POLICY: Fed's Kaplan May Support Extending 13(3) Programs

--Dallas Chief Raises Unemployment Forecast Amid Covid Outbreak

WASHINGTON (MNI) - Dallas Fed leader Robert Kaplan said Monday that emergency 13(3) programs should not be pulled back while unemployment is elevated and the nation struggles with increased Covid-19 cases.

With a majority of the Fed's emergency 13(3) programs set to sunset in late September, Kaplan will look at the employment rate and other labor market indicators when determining whether he will support their extension.

"I would not be an advocate of prematurely withdrawing these programs. I'm going to want to see that we are getting this virus under control, that we are seeing sustained and healthy growth in the workforce," Kaplan said in a National Press Club webinar.

"We are going to have to watch very carefully how we emerge from this crisis," he said, "because there's a point at which we need to let some of those programs sunset and show restraint and let normal market functioning take over and wean off some of these programs."


The FOMC voter warned that the coronavirus pandemic "could go on longer than people think. Not just in 2020 but a good part into 2021, until there is a vaccine or we do a better job following healthcare protocols." Kaplan urged that everyone wear face masks.

The recent surge in coronavirus cases across America hasn't changed Kaplan's forecast for GDP shrinking 4.5% to 5%, this year, but his year-end unemployment estimate ticked up to 9%-10% from estimates a week prior.

"There may be more that the Fed needs to do," Kaplan said. Congress also needs to consider further support including extended unemployment benefits and grants to state governments, he said.

With a resurgence of the virus, consumer confidence could be weakened. "You will have more small business failures."

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

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