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Top Fed official warns US recovery could stall - report

By Sean Farrell

Date: Tuesday 07 Jul 2020

Top Fed official warns US recovery could stall - report

(Sharecast News) - A top Federal Reserve official has warned the US economic revival could stall because of the recent increase in Covid-19 infections in large southern and western states.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, told the Financial Times high-frequency data had shown economic activity levelling off in terms of business openings and journeys. The Atlanta Fed's district covers regions such as Florida that have been hit hard by the recent resurgence of cases.

"There are a couple of things we are seeing and some of them are troubling and might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise," Bostic told the FT. "We are watching this very closely, trying to understand exactly what is happening."

Recent US jobs figures have been better than expected after employers shed more than 20m workers in the early months of the crisis, suggesting the world's biggest economy could bounce back strongly from Covid-19 lockdowns. But renewed outbreaks in several states, including Texas, Arizona and California have prompted a return of local restrictions.

Jefferies said on Monday US economic activity had flatlined after two months of gains and that the loss of momentum was apparent across frequently updated indicators such as restaurant bookings and traffic density. Governors in several states halted plans to reopen economies as the US reported more than 55,000 new coronavirus cases on 3 July.

Bostic told the FT the Atlanta Fed was examining whether the levelling off of activity was a pause or something more sustained. He said his biggest concern was "to what extent are business losses permanent, are job losses permanent". He said Congress should consider a further package of fiscal support with much of the original $3tn of support to businesses and households expiring.

"As more information has come in there's reason to suggest this is going to last longer," Bostic said. "It's only natural, given that possibility, to start thinking about what the next relief package should look like."

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