Final hours! Save up to 55% OFF InvestingProCLAIM SALE

Clarida Says Economy May Need More Fiscal, Monetary Support

Published 05/21/2020, 01:12 PM
Updated 05/21/2020, 01:18 PM
© Reuters.  Clarida Says Economy May Need More Fiscal, Monetary Support

(Bloomberg) -- U.S policy makers may need to provide the battered economy with additional support beyond the unprecedented actions they’ve already taken, Federal Reserve Vice Chairman Richard Clarida said on Thursday.

“Depending on the course the virus takes and the depth and duration of the downturn it causes, additional support from both monetary and fiscal policies may be called for,” he said in the text of a speech to be delivered via webcast to New York Association for Business Economics.

While pledging that the Fed will continue to act aggressively to counteract the economic blow from the coronavirus crisis, Clarida also stressed the limit of central bank’s support -- it can only lend out money, not spend it -- and said budgetary action was essential.

“Direct fiscal support can make a critical difference, not just in helping families and businesses stay afloat in a time of need, but also in sustaining the productive capacity of the economy after we emerge from this downturn,” he said.

Congressional Debate

Clarida’s comments echo those made over the past week by Fed Chairman Jerome Powell and come ahead of expected negotiations between Republican and Democratic lawmakers and the White House over another fiscal package. Lawmakers have already passed nearly $3 trillion of measures to cushion the economy from what Clarida called the “severe” blow from the coronavirus crisis.

The Fed vice chairman said he expects the economy to begin to pick up and unemployment to start to fall in the second half of the year, though he added it will take some time for the economy to fully recover. He also cautioned that the outlook remained highly uncertain and subject to the course of the virus.

The jobless rate more than tripled in April to 14.7% as employers cut an unprecedented 20.5 million jobs. A further rise is expected this month.

Clarida called the virus crisis a “disinflationary shock” and suggested that the drag on prices may last for a while.

“While the COVID-19 shock is disrupting both aggregate demand and supply, the net effect, I believe, will be for aggregate demand to decline relative to aggregate supply, both in the near term and over the medium term,” he said.

(Updates with more comments from Clarida from fifth paragraph.)

©2020 Bloomberg L.P.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.