Virus resurgence in the fall could prompt double-dip recession, Kansas City Fed president says
- The US could plunge into a second bout of deep economic pain if the coronavirus pandemic flares up again, Esther George, president of the Federal Reserve Bank of Kansas City, said.
- An "important risk" to hopes for a full recovery "is thinking about what happens as we come into the fall, whether we see any resurgence in the virus that would cause an additional pullback," George said in a CNBC interview.
- The central bank president still expects the country to notch healthy growth in the near future, provided the virus can be kept in check.
- "It's too soon to speculate" on what other Fed aid is needed, she added, as low rates and lending facilities are already "very accommodative."
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The coronavirus recession could sharply worsen before ending if the pandemic isn't brought under control, Esther George, president of the Federal Reserve Bank of Kansas City, said.
Daily new cases in the US have been steadily dropping through the end of summer, but economic data hasn't reflected a similarly positive trend. Weekly jobless claims continue to land near or above 1 million, and consumer confidence gauges remain well below their pre-pandemic highs.
With the economic recovery already turning fragile, any slip-up in containing the coronavirus could drive a second recessionary plunge, George said in a CNBC interview aired Wednesday morning.
"An important risk to that outlook is thinking about what happens as we come into the fall, whether we see any resurgence in the virus that would cause an additional pullback in the economy," she said.
Still, the central bank is holding off on issuing additional aid. George expects the country to post steady growth in the third and fourth quarters, so long as the path of the virus continues to trend lower. Policymakers will "really have to wait and see" whether new monetary easing is necessary, she added.
"Financing conditions are very accommodative. We have low rates, we still have capacity in those credit facilities," the Fed president said. "I think it's too soon to speculate on what else might be needed."
George's comments arrive one day before Fed Chairman Jerome Powell delivers a keynote address at the central bank's annual Jackson Hole, Wyoming, conference, which will be held virtually. The chair is expected to detail the Fed's plans to hold interest rates near zero for several years and coax the economy back to full employment and strong output.
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