(Reuters) – Uncertainty is weighing on the U.S. economic outlook, Richmond Federal Reserve Bank President Thomas Barkin warned on Wednesday, keeping households from spending, businesses from investing and even banks from extending credit.
To reduce that uncertainty, he said, at least two things are needed: better control of the coronavirus, and more government aid for the unemployed and for businesses.
“We simply need to get this virus under control to give people confidence and certainty,” Barkin told the National Economists Club in a virtual event. But the economy also needs “continued fiscal support” to get through this period, he said.
The White House and U.S. lawmakers have failed to reach agreement on a new rescue package, after key parts of a $2.3 trillion law passed in March expired in recent weeks. The government aid helped cushion the economy from what would have been an even worse downturn, Barkin said.
“We need to be aware of two economies: there’s the one we see in the numbers, and the one we might see if we weren’t benefiting from unprecedented fiscal and monetary stimulus,” he said. Many small businesses, for instance, might have filed for bankruptcy during the first wave of shutdowns if not for the government’s now-closed Paycheck Protection Program.
“Fiscal stimulus in particular was very useful to put money in people’s pockets” and much of it has been spent, he said. “If we do not have further business support and stimulus programs, then we will see what the underlying looks like, post-Covid.”
(Reporting by Ann Saphir; Editing by Sandra Maler and Diane Craft)
