Fed's Bullard: Says Fed willing to do more to assist with crisis
|St. Louis Federal Reserve President James Bullard said today that argues that a potential $2.5 trillion hit coming to the economy is both necessary and manageable if officials move fast and keep it simple, according to a Reuters report.
It may seem an unconventional view in a moment of global anxiety, but Bullard argues the shutdown measures now being rolled out are essential to shortening the course of the pandemic. They must also be coupled with massive federal government support to sustain the population through its coming isolation and prime the economy to pick up where it left off.
To Bullard that means:
- Match any lost wages.
- Match any lost business.
- No questions asked.
- No arguments about bailouts or "moral hazard" - the sticky issue of publicly funded rescues of bad actors.
And, above all, when the losses are tallied, don't call it a recession.
Recessions are the ordinary - even predictable - contractions in activity that mark the end of normal business cycles. Bullard, who has earned a reputation inside the Fed for a penchant to rethink problems and reframe debates, said this is anything but.
"Frame this as a massive investment in U.S. public health," Bullard said in a Friday telephone interview.
key comments
- Bullard says massive drop in output, rise in joblessness from coronavirus should be matched dollar for dollar, with federal government borrowing as needed.
- Says full offset of wages, earnings would set stage for rapid rebound.
- Says sharp economic contraction in second quarter should be seen as investment in public health.
- Says 2Q GDP could drop a record 50%.
- Says unemployment even as high as 30% should be seen as a success and sign people are staying home.
- Says Fed willing to do more to assist with crisis.
Market implications
The policy measures r designed and implemented to help stabilise markets and there could be more t come from the Fed given the expected sharp rise in new US Treasury issuance and as the recession deepens with the spread of the virus. The US dollar stands to gain in a risk-off market, a flight to cash and liquidity.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.