‘I expect the economic rebound in the second half of the year to be less than was hoped for at the outset of the pandemic,’ Eric Rosengren says.
Photo: Steven Senne/Associated PressFederal Reserve Bank of Boston President Eric Rosengren said the U.S. central bank and broader government will need to do more to help the economy emerge from the ongoing impact of the coronavirus pandemic.
The official also offered an update on the central bank’s newly launched Main Street lending effort, expressing confidence that it will help those who need credit.
“More support is likely to be needed from both monetary and fiscal policy,” Mr. Rosengren said in the text of a speech to be given by video on Friday.
“Unemployment remains very high, and because of the continued community spread of the disease, and the acceleration of new cases in many states, I expect the economic rebound in the second half of the year to be less than was hoped for at the outset of the pandemic,” he said.
In response to a question after the speech, Mr. Rosengren said, “It’s incredibly important that we support both individuals and businesses that have been affected by this disruption.” While he declined to say what he’d like elected leaders to do, he said Congress “should think expansively about the best way to support those that are most vulnerable.”
Mr. Rosengren pushed back in his speech at mounting optimism, driven by recent data, that the economy may be rebounding faster than was expected. Much of that was fueled by unexpected job gains in May, but other data have also told an unexpectedly optimistic story about where the nation is after shutting down much of the economy due to the coronavirus pandemic.
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Mr. Rosengren said that compared to the current 13.3% jobless rate—it started the year at 3.6%—he expected the jobless rate to stay above 10% for the whole year. He also said inflation should be well under the Fed’s 2% target. With this outlook and the lack of tension between the Fed’s goals of promoting strong job growth and keeping prices stable, he saw space for the central bank to do more, but he did not say what that might entail.
He also offered some views about the economy’s reopening. Commenting on the cautious restart in the U.S. Northeast, he said a “conservative approach to reopening is likely to pay dividends for the health of vulnerable populations and for the medium- and longer-term health of the economy.”
The official warned a botched reopening could bring the opposite impact and set back any gains in hiring as it “could also sap investor, consumer, and firm confidence.”
Mr. Rosengren’s update on the central bank’s Main Street lending facility, which is in the process of launching, was upbeat.
“I am very positive about the promise of the program in helping local businesses and lenders maintain vital business credit during these very challenging economic times,” Mr. Rosengren said. He said he was seeing a lot of interest from banks to participate and noted, “We are seeing tremendous interest in the loans from businesses.”
Corrections & Amplifications
The comments in this article were made by Eric Rosengren. An earlier version of this article incorrectly attributed a comment to a Mr. Warsh. (Corrected on June 19.)
Write to Michael S. Derby at michael.derby@wsj.com
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