Fed’s Kaplan: We will need fiscal stimulus to lower high unemployment

Anil Panchal FXStreet

President of the Federal Reserve Bank of Dallas Robert Kaplan was recently on wires while reiterating his opposition for the negative rates. The Fed policymaker also insisted on the use of fiscal stimulus to combat high unemployment.

Key quotes

Believes the US unemployment rate will be at 10% by the end of 2020, annualized GDP contraction of 25-30% in Q2 2020.

We will need more fiscal stimulus to lower high unemployment.

Does not favor the Fed using negative rates.

Negative rates in the US could do great damage.

A 'V'-shape recovery is unlikely, but possible if we made a massive investment in testing.

If you don't have good testing, contact tracing, treatment or vaccine consumers may not behave as before the crisis.

Cannot remain shut down indefinitely, question is how to open up.

Reopen gradually so it sticks.

Do not want to end up with a spike in infections.

FX implications

The news suggests mixed clues as the defying of negative rates could favor market optimists while downbeat economic projections weigh on the risks. In both cases, the US dollar should gain additional bids. That said, USD/JPY holds onto Thursday’s recovery while taking rounds to 107.30/25.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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