Fed's Bullard says V-shaped economic rebound from coronavirus more likely than currently expected
- There's "no reason [the economy] can't come back in a 'V' shape," St. Louis Federal Reserve President James Bullard said on Tuesday, according to Bloomberg.
- The historically dovish chief stressed the importance of nationwide coronavirus testing, noting that such tests can drive the consumer confidence needed for a sharp rebound.
- Other economists have been decidedly less optimistic, forecasting a prolonged economic downturn as unemployment spikes and profits tank.
- "I know it's become popular to say" a V-shaped rebound can't happen, Bullard said, adding, "I think it can happen."
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St. Louis Federal Reserve President James Bullard is still hoping an economic resurgence could arrive this year.
Bullard, one of the Fed's more dovish presidents, said he sees "no reason [the economy] can't come back in a 'V' shape" while speaking to the St. Louis Regional Chamber on Tuesday, according to Bloomberg. A rapid recovery hinges on widespread testing for coronavirus and risk aversion throughout the economy to prevent recurring outbreaks, he said.
"I know it's become popular to say that is not going to happen. I think it can happen," the Fed president added.
Numerous economists deem a sharp rebound an economic pipe dream, citing spiking unemployment and the slow containment of coronavirus. The International Monetary Fund joined the chorus on Tuesday, saying that full elimination of the virus by the first half of 2020 would still yield the worst recession in nearly a century.
Risk of a deeper slump is highly skewed to the downside, the IMF added, as a prolonged pandemic or premature economic reopening can push recovery into 2022.
Keeping businesses and households afloat is critical to setting up a strong economic bounce-back, Bullard said. The government has already extended trillions of dollars worth of relief through direct payments, emergency loans, and bolstered unemployment insurance. The Federal Reserve has similarly extended a helping hand amid the public health crisis, pushing its benchmark interest rate close to zero and boosting liquidity in struggling markets.
The virus lockdown is costing the nation about $25 billion in lost household income every day, Bullard estimated, placing significant value in a thorough restart to economic activity. The central bank CEO emphasized that lifting workers' and consumers' confidence in going out is key to a nationwide revival.
"As incidents of the disease go way down, then I think you should be able to reopen. Ideally you would like to test everybody. If you can't test everybody, you are going to have to use relatively crude substitutes like taking everybody's temperature," the president said.
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