Minneapolis Federal Reserve President Neil Kashkari became the latest central banker to warn against further stimulus in the US economy, saying the cost behind doing anything could not be huge.
As tensions escalate in Washington, Kashkari told CNBC that workers, businesses and governments need more cash from Congress.
“There are a lot of consequences if we just leave things at that, and the end of the recession is very bad,” he said on Squawk. “If we don’t support people who have lost their jobs, they can’t pay their bills and then the economy is in turmoil and the recession is worse than it needs to be.”
On Tuesday, when President Donald Trump ordered his negotiators to stand down after the November election, talk of getting more money from Washington stopped. However, Trump later corrected his stance, urging the aircraft industry to be specifically funded, and the general piece approach Democrats previously rejected.
Fed officials are warning of a failure to take action.
Ahead of Trump’s move, Fed Chairman Jerome Powell said Tuesday that additional financial assistance was needed and there was little concern about doing more. Loretta Mester, president of the Cleveland Fed, told CNBC after Trump’s order that a delay in stimulation would mean a “much slower” recovery.
“It is important that whatever assistance can be provided to those who have lost their jobs,” Kashkari said. “Any assistance that can be provided to small businesses affected by the epidemic is important, and supporting state and local governments, whose incomes have been hurt by the Covid crisis, is also important, as they employ many people.”
Kashkari added that the nature of the recession, which was caused not only by weakness during the economic crisis but also by the coronavirus epidemic, meant that there was no particular “moral crisis” in using public money to bail out private industry.
Congress has so far approved more than 2 2 trillion in funding, although most of it has expired. For its part, the Fed has cut interest rates and implemented more than a dozen lending and market functioning programs.
“There are millions of Americans who are affected by this, and I think that’s the only way to deal with them. I don’t think it’s fair to do that and I don’t think it’s good for the economy as a whole,” Kashkari said.
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