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Fed's Kaplan says economy could shrink as virus surges

EconomyNov 19, 2020 01:25PM ET
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© Reuters. FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan speaks during an interview in his office at the bank's headquarters in Dallas

(Reuters) - Dallas Federal Reserve Bank President Robert Kaplan on Thursday said the economy could shrink this quarter as consumers in more states and cities pull back from economic activity amid the record coronavirus case surge.

"It is possible we could have negative growth if this resurgence gets bad enough and mobility falls off enough," he said, pointing to a drop in activity already visible in places like El Paso, Chicago, Utah, Wisconsin, and Colorado. "The next couple of quarters is going to be very challenging."

Kaplan had previously said he expected the economy to grow at a 4% to 5% annualized pace. "With this resurgence, the risks are all to the downside," he said.

As the vaccine is rolled out, economic activity should rebound, especially in the second half of next year, he predicted.

The Fed is buying $120 billion of bonds each month and should continue doing so, Kaplan said.

"If we needed to, if this got bad enough, we could extend maturities, but I woulnd't increase the size," he said.

In addition, he said, it's "critical" the Fed keeps its emergency lending programs going into next year. They are currently scheduled to expire on Dec. 31.

Fed's Kaplan says economy could shrink as virus surges
 

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Comments (2)
Alan Rice
Alan Rice Nov 19, 2020 2:03PM ET
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duh.
Thom Miller
Thom Miller Nov 19, 2020 1:58PM ET
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Could? Where’s this guy been living? Mar-a-Lago?
 
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