bloomberg | Federal Reserve Bank of St. Louis President James Bullard predicted
the U.S. unemployment rate may hit 30% in the second quarter because of
shutdowns to combat the coronavirus, with an unprecedented 50% drop in
gross domestic product.
Bullard called for a powerful fiscal response to replace the $2.5 trillion
in lost income that quarter to ensure a strong eventual U.S. recovery,
adding the Fed would be poised to do more to ensure markets function
during a period of high volatility.
“Everything is on the table” for the Fed as far as additional
lending programs, Bullard said in a telephone interview Sunday from St.
Louis. “There is more that we can do if necessary” with existing
emergency authority. “There is probably much more in the months ahead
depending on where Congress wants to go.”
Bullard’s grave assessment of the world’s largest economy underscores
the critical need for Congress and the White House to quickly find
agreement on a massive aid program. The Fed last week restarted
financial crisis-era programs to help the commercial paper and money
markets, after cutting interest rates to near zero and pledging to boost
its holdings of Treasuries by at least $500 billion and of mortgage securities by at least $200 billion.
“This is a planned, organized partial shutdown of the U.S. economy in
the second quarter,” Bullard said. “The overall goal is to keep
everyone, households and businesses, whole” with government support. “It
is a huge shock and we are trying to cope with it and keep it under
control.”
The U.S. central bank bought $272 billion of government debt last week, of the more than $500 billion authorized, which Bullard emphasized should not be seen as a limit.
