Exclusive: Fed’s Bullard – Wall Street ‘almost right’ as US muddles by virus risk

(Reuters) – A record-breaking share in a pandemic may not seem to be reaching, but President St. Bull Federal Reserve James Bullard says Wall Street is doing well and he expects the United States to do better than many forecasters expect as businesses and households learn to manage the risks of coronavirus.

Although the situation seems chaotic, with federal, state and local officials explaining competing ideas about what activities are safe and under what circumstances, Bullard said that adjustment shows in process, and the country will be able to adapt its behavior and economic activity to what an “ongoing” health threat it allows.

“I think Wall Street has mentioned this just so far,” he said, noting how companies like Wal-Mart, with its mandatory masking and other rules, have found ways to serve that others will copy.

“There’s a lot of capacity to reduce and go through and most of the data is upside down … So I think we’ll do something better,” Bullard said in an interview with Reuters. “I expect more companies to be able to operate and run more of the economy … successfully in the second half of 2020.”

Bullard said it was shrinking the U.S. economy by 4% for the year, significantly more optimistic than the -6.5% median projection his colleagues made in June, and also less dire than the median forecast of economists controlling Reuters in mid-July. . That saw a hit of 5.6% to GDP for the year, with a catastrophic annual decline of 32.9% in the period April to June, offset by what are likely to be similar growth rates in the third and fourth quarters.

In March, the Fed cut interest rates to zero and rolled out trillions of dollars in bond purchases and other programs to support the economy. There may be more to come, but Bullard said he sees no urgency to make longer-term promises about interest rates than to try to boost the economy through more stimulus efforts.

That will have to wait, he said, until the health risks are more contained and the Fed actively seeks more lending, spending and activity to boost the economy as it is safer for people to fully engage with commerce again.

“Right now, there are expectations that the Fed will stay where we have been for a very long time,” Bullard said. “The idea that you want to stimulate things assumes the virus is gone.”

THE RISK SETS HOG

The focus should be on managing the next period, and Bullard acknowledged that the risks are substantial – or from the behavior of the virus as the weather gets colder and the conventional flu season arrives, as the threat to the economy as unemployed families losing the benefits of government and spending power.

Bullard said he feels optimistic on both fronts.

With a nationwide vote in November, “you probably have Congress doing what Congress always does – passing a stopgap measure to get past the election,” that restores at least some of the benefits that U.S. consumer spending has kept on track and the limited number of failures and failures of loans.

At the health crisis, Bullard acknowledged that his earlier, provocative call that the economy could be stopped in its tracks, kept abreast of government aid, and just as quickly resumed, was ‘shattered’ because of the virus. ” continued to be persistent. ”

But it also, he claimed, has proved less deadly than early estimates of 1 million to 2 million American deaths by 2020. About 172,000 Americans have died so far, and the current 7-day moving average of daily deaths, at about 1,000, is about half where it was in April.

That, he argued, would mean that another lockdown would be unfavorable – a reporter for at least one of his colleagues, Minneapolis Fed President Neel Kashkari, who is calling for a strict six-week lockdown of the economy to crush the virus. ‘.

“That’s appropriate in the early stages,” Bullard said. “Now you know a lot more … about which situations are dangerous and which are not so dangerous, so you can have more granular policies that limit risk … That’s exactly what happens.”

“You do not have to close companies that you do not have to close.”