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Dec. 1, 2020, 3:10 p.m. EST

Fed’s Daly sees ‘slow grinding recovery’ until the coronavirus is fully behind us

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by Greg Robb

The U.S. economy will continue to expand but at a painstakingly incremental rate until the coronavirus pandemic is under control, said San Francisco Fed President Mary Daly on Tuesday.

“I am assuming a slow grinding recovery persists until we have the virus fully behind us — which is predicated on a vaccine that is widely available and distributed,” Daly told reporters following a speech to Arizona State University.

Some economists are concerned there could be another economic contraction in coming months.

But Daly said she only thought there would be a modest slowing as growth plateaued due to the resurgence of the coronavirus in recent weeks.

Cautious optimism in the stock market that the economy will be past the coronavirus by the middle of 2021 is a positive sign, but Daly said she’s keeping her eye on the current state of employment and inflation.

“I’m just very interested in attending to the economy we have, while we wait for the economy of the future,” she said.

Daly said she thought Fed policy was in a good place.

The Fed has cut its benchmark interest rate to zero and is buying $120 billion each month of Treasurys and mortgage-related assets to support financial markets and bolster growth.

Some analysts think the Fed will tweak its bond-buying to weight it toward more longer-dated debt.

Daly said she didn’t want to “front-run” any decision from the Fed.

“We’re always actively debating and discussing those things and learning more about that. We’re still in the learning mode about it,” she said.

“When you look at financial markets right now, I don’t see any sense or indication that they are misunderstanding where we are headed, and that we need to somehow do something different to get financial markets where we need them to be,” Daly said.

Daly said she didn’t think it was time to stimulate the economy further.

“Coronavirus cases are surging. We are having to go back into our homes for safety and the health of ourselves and others,” she said.

“It is not the time to stimulate the economy aggressively and get people out in the economy because that would be unsafe,” she said.

Rather, policymakers, including Congress, should “build a bridge” to make sure people make it across the pandemic.

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