Fed’s Kaplan: US GDP may shrink 25% to 35% in second quarter, then grow in second half

Early Thursday morning in Asia, Dallas Federal Reserve Bank President Robert Kaplan crossed wires, via Reuters, to suggest that the US economy will recover in the second half of 2020 after shrinking 25-35% during the second quarter (Q2).

Key quotes

Sees US Unemployment Rate rising as high as mid-teens, falling to 7%-8% by year end.

The issue is, what percentage of capacity are we operating at, in the third quarter and in the fourth quarter.

Even after the economy begins to reopen, consumers may be more cautious.

Financial and job insecurity might cause people to save more, spend less.

Expects there will be a 'phased' return to work.

US businesses to run at less than full capacity as economy reopens.

Ideally companies will be able to test workers for infection as they return to work.

Asked if there is still more the Fed will do, Kaplan said, ‘I would say, stay tuned.’

FX implications

While following the news, coupled with the latest coronavirus updates from the US, the market’s risk-tone turned heavy. To portray the same, the US stock futures differed from Wall Street’s upbeat performance while opening in negative.