Finance

Top Fed official: US economy will need sustained support

Greg Nash

Tom Barkin, president of the Federal Reserve Bank of Richmond, told The Wall Street Journal Tuesday that the economy will need sustained support from the Fed in order to recover from the coronavirus pandemic. 

Barkin said that while keeping interest rates low for longer could invite risky behaviors in the financial market, addressing the unemployment rate is a more urgent matter. 

“We’ve got 10 percent unemployment and inflation below our target,” he said. “It seems pretty clear to me we ought to go all out. I don’t have an aspiration to stay at zero forever … but it’s hard for me to make the case right now that we ought to be anywhere other than where we are.”

Barkin added that the Fed’s current guidance, which says it will maintain rates near zero until the economy “has weathered recent events,” will eventually have to be amended. 

“There will be a time where it’s appropriate to update that,” Barkin said. “I don’t feel like there’s urgency, but I do acknowledge it’s time-limited.”

Barkin said the economy has taken longer to recover than anticipated because the virus has continued to surge in some areas. He said that the public’s ability to comply with public health guidelines will be a key factor in reopening the economy. 

“What we’ve learned is that if you reopen with the right kind of distance protocols, and you have compliance with it … then we have a shot at having an economy that’s not disease-free, but at least is predictable enough that people can transact in it,” Barkin said. “We are learning that there’s a model of maintaining public health that keeps this virus bouncing around as opposed to escalating.”

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