Fed’s Daly sees negative 2020, slow rebound for U.S. economy

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Federal Reserve Bank of San Francisco President Mary Daly said she expects the U.S. economy to shrink this year with a recovery only getting under way next year.

“2020 as a whole is going to be a negative year, and then we’ll start to see a positive year in 2021,” Daly said Thursday in an interview on Bloomberg Television. With elevated uncertainty around the spread of the coronavirus, she said “that’s about as good as forecasting can get right now.”

Federal Reserve Bank of San Francisco President Mary Daly
Federal Reserve Bank of San Francisco President Mary Daly

Nonetheless, Daly, who is not a voter this year on the interest-rate setting Federal Open Market Committee, expressed some optimism based on preparations she sees many companies in her district making as they anticipate re-opening for business.

“No one who I talk to is looking at a V-shaped recovery, they really think this will be gradual and it will take time to build confidence back up for both workers and consumers,” Daly said. “But they are more optimistic than you might think. They are ready to re-open and re-engage.”

Earlier Thursday, the Labor Department reported another 3.17 million workers claimed unemployment benefits last week, bringing the seven-week total to about 33.5 million as businesses shuttered across the country to limit the spread of the coronavirus.

The U.S. central bank has responded to the crisis aggressively, lowering rates to near zero, purchasing trillions of dollars in bonds and announcing nine emergency lending facilities — all aimed at keeping credit markets functioning or providing direct aid to companies, cities and states.

Daly said she doesn’t expect prices to suffer from deflation, or for inflation to exceed the Fed’s 2% target, partly because inflation expectations have remained stable.

“We are really looking at inflation being tepid not getting up to our 2% target for a while,” she said. The Fed will “do everything in our powers to achieve our dual-mandate goals and I think that gives market participants, households and businesses confidence.”

Bloomberg News
Economy Mary Daly Federal Reserve Federal Reserve Bank of San Francisco