Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, said Sunday it's overly optimistic to assume the economy will coming roaring back once people go back to work.
In an interview on CBS News’ “Face The Nation,” Kashkari pushed back on predictions of a so-called V-shaped recovery from the coronavirus-fueled impact on the economy by President Donald Trump and his top economic adviser, Larry Kudlow.
“It’d be wonderful if some new therapy were developed in the next couple of months that people could have confidence to go back to work, that they could get treatment, then potentially we would have a V-shaped recovery,” he said.
“But barring some healthcare miracle like that, it seems like we're going to have various phases of rolling flare-ups…different parts of the economy turning back on, maybe turning back off again. This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine. It's hard for me to see a V-shaped recovery under that scenario.”
“I think we should all be focusing on an 18-month strategy for our health care system and our economy,” he added.
He also dismissed the suggestion that testing and surveillance will be the key to getting workers back on the job.
“I don't think we should put all of our eggs only in the mass-testing basket,” he said. “We should try to make that work. We should also invest fully in vaccines, fully in therapies. But then I think we're going to need to be smart about how we start to reopen parts of the economy with those who are at lowest risk until that capacity and that testing and those vaccines and therapies come online. I think we need an all-of-the-above approach because we don't know where we're gonna have the breakthrough.”
Kashkari also predicted the banking sector might ultimately need help during the crisis as well.
“Right now, the banks are well-capitalized relative to where they were in 2006,” he said. “But if this goes on long enough, it could produce strains in the banking sector. And then the Fed and Congress and Treasury would have to step in to make sure that the banks are sound.”
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