(Reuters) – The economic recovery will likely be more gradual in fall and winter if coronavirus infections rise and if Congress fails to provide more fiscal support, Boston Federal Reserve President Eric Rosengren said on Wednesday.
The policymaker said his economic outlook is more pessimistic than those of his peers at the Fed because he expects a resurgence of the virus to dampen consumer spending and strain the commercial real estate market.
“Recent economic data have been encouraging, but I believe the most difficult part of the recovery is still ahead of us,” Rosengren said in remarks prepared for a virtual forum organized by the Boston Economic Club.
Rosengren said monetary policy and fiscal policy will need to remain “highly accommodative” until a vaccine is widely available, which is likely required before businesses and consumers will return to previous spending levels.
Some businesses may choose not to renew their leases, which could lead to an increase in mortgage delinquencies and affect small and medium-sized banks, he said. Fiscal programs that send money to impacted businesses without requiring them to take on more debt can help ease the pain, Rosengren said.
The Fed official said he is also concerned that the labor market could recover more slowly going forward because some workers will need to retrain for new jobs in different industries, a process that can take time.
“Potential financial impediments and challenges in the labor market make the recovery process more gradual than any of us would prefer,” Rosengren said.
Rosengren said he hopes guidance recently issued by the Fed clarifying how lenders and regulators should treat loans issued through the Main Street lending program will encourage more banks to participate. The nation’s largest banks are currently not active in the program, he said.
(Reporting by Jonnelle Marte; Editing by Chizu Nomiyama)
