The Federal Reserve will have to support the economy because the recovery from the coronavirus pandemic “will be slow,” a top official at the central bank said Friday.
“There’s more pain we need to support the economy,” Loretta Mester, president of the Cleveland Fed, told CNBC’s Steve Liesman during an interview with Squawk Box. “As it stands, we will have to take our time to evaluate that, but I think accommodating monetary policy in this whole recovery will be very important.”
Earlier this year, the Fed cut rates to near zero as the coronavirus outbreak forced the U.S. economy to shut down. The central bank also launched an open endowment program for asset purchases, along with other measures, to support the economy during this period. On Thursday, Fed Chairman Jerome Powell proposed a framework for inflationary policies that would keep rates lower for longer.
Mester pointed out that high-frequency data examined by the Fed show that economic activity has slowed slightly since the country began to open up.
“That is what you would expect. It will fit here and start,” Mester said. “It’s absolutely true that when the economy started to open up, you saw better data on hiring and you saw that activity increase. But I think the virus is kind of a driving force.”
Coronavirus cases in the U.S. have ballooned to more than 5.8 million, according to data from Johns Hopkins University. However, the number of new daily infections has recently tempered and has remained below 50,000 since mid-August.
“At least in our district, we’ve seen a temperament in hiring, and companies are evaluating the number of new hires they want to bring back on board because they don’t know what the outcome will be,” Mester said.
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