Trump predicts 'big bounce' for US economy following end of coronavirus lockdown

US economy could take two years to return to 'full strength', Federal Reserve says

Economy expected to 'underperform' for near future as nation recovers from pandemic's effects

Alex Woodward
New York
Thursday 16 April 2020 23:06

After unprecedented moves to stabilise markets during the coronavirus pandemic, including injecting billions of dollars into the economy, the Federal Reserve says the scale of the outbreak's impact is "unknown" and could take several years to repair.

Donald Trump has urged for the US economy to "re-open" and get Americans back to work, issuing guidance to states that would allow them to resume business as usual, though the Fed warns that consumer spending and the market's return to "normal" will depend on whether the virus is contained.

"There's certainly parts of the economy that as people go back to work, I see the economy bouncing back," New York Federal Reserve president John Williams said in remarks to the Economic Club of New York on Thursday,

But returning the US economy to "full strength" could take up to two years, he said. "First we have to make sure we're seeing the number of cases plateau and come down, and then think about a gradual return to normal."

In March, the nation's central bank slashed interest rates to near-zero after the economy absorbed a massive blow following the outbreak, though stock futures continued to plummet despite the stimulus.

More than 22 million Americans have filed for unemployment claims in the wake of business closures and job losses within the last few weeks.

Among a suite of programmes to combat the economic fallout from the pandemic, the Fed also expanded its holdings of US Treasury securities by at least $500bn, in addition to an increase of government mortgage-backed securities by another $200bn, in the hopes of lowering the costs of longer-term debts and bolstering the struggling housing market.

In a statement last month, the Fed said: "The coronavirus outbreak has harmed communities and disrupted economic activity in many countries ... The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses."


On Thursday, Mr Williams said: "To put the current situation in context, we are running more open market operations, for greater sums, than at any time in our history."

Mr Williams stressed that "the economy is under distress in ways we've not experienced in our lifetimes" and predicted the economy will be "underperforming" for the near future.

He declined to offer any specifics about its economic forecast, but suggested that billions of dollars that have been pumped into banks to soften the blow must work in concert with financial relief efforts in Congress. The Fed and the US Treasury Department have put forward plans to issue $6tn in loans.

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