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Boston Fed chief: States’ rush to reopen slowed US recovery

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Posted at 11:03 AM, Aug 12, 2020
and last updated 2020-08-12 12:03:42-04

WASHINGTON (AP) — A top official at the Federal Reserve criticized the decision by many states to reopen businesses this spring before getting the virus fully under control, and said those choices have hindered an economic recovery in the U.S.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said states in the South and West that allowed businesses to reopen after shutting down for a brief period did register an initial burst of economic activity. But spikes in infection rates soon followed and economies in those states are now lagging those in the Northeast as consumers have become more cautious.

Rosengren’s comments, delivered online Wednesday, are among the most specific yet by a Fed official tying the health of the economy to the nation’s ability to control the virus. Fed Chair Jerome Powell has emphasized generally that recovery from the recession depends on conquering the pandemic, but Rosengren’s remarks delved into different infection rates between the U.S. and Europe, and between regions of the U.S.

“Limited or inconsistent efforts by states to control the virus based on public health guidance are not only placing citizens at unnecessary risk of severe illness and possible death – but are also likely to prolong the economic downturn,” Rosengren said in prepared remarks.

“Despite the sizable interventions by monetary and fiscal policymakers … the recovery may be losing steam, as activities in many states are once again restricted (officially or voluntarily) to slow the virus’s spread,” Rosengren said.

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