(Reuters) – The economic recovery from the crisis spurred by the novel coronavirus could proceed more slowly than policymakers initially anticipated, potentially including a second wave of infections in the fall and another increase in the unemployment rate, Minneapolis Federal Reserve Bank President Neel Kashkari said on Friday.
“The recovery will take longer than we had hoped only a few months ago,” Kashkari said during a Twitter chat moderated by CBS News. “Many jobs are going to take a long time to come back.”
The federal government needs to keep supporting Americans who lost their jobs because of the coronavirus crisis and may not get back to work for a while, he said.
Unemployment benefits can help get money to jobless people who need help paying their bills, and capping those benefits at workers’ previous pay could “eliminate the disincentive to return to work,” he said.
Kashkari also cautioned that banks could take a hit if the downturn is prolonged. “I am concerned the longer this goes on, the more losses banks will face,” he said.
Large banks have more capital than they did before the 2008 financial crisis, but it may not be enough, he said, calling on banks to stop paying dividends and raise capital.
(Reporting by Jonnelle Marte; Editing by Diane Craft and Andrea Ricci)
