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Two senior Federal Reserve officials tried to be upbeat about the economic outlook on Friday but acknowledged it is hard to predict when the economy will be able to spring back to life after the shutdown ends.
“In this environment…forecasts are really difficult to do,” said Atlanta Fed President Raphael Bostic, in an interview on Bloomberg television.
The conventional wisdom is that the January-March quarter will show flat economic growth, followed by a severe contraction in the April-June quarter.
After that is anyone’s guess.
“It is an open-question as to how quickly we get the public health crisis, this coronavirus spread, under control,” Bostic said.
The Atlanta Fed president said his team is divided : Some economists expected a recovery as soon as July, others in August or September and yet others forecasting a delayed rebound into the October-December period.
Bostic said that because the economy was in such good shape that there could be strong rebound once the crisis is under control.
Fed Chairman Jerome Powell made a similar point in his rare appearance on the NBC News “Today” program.
Read: Powell tries to reassure Americans the economy will recover
In a separate interview with Bloomberg, Robert Kaplan, the president of the Dallas Fed, forecast a contraction in the range of a 20% annual rate in the second quarter.
The unemployment rate might peak “in the low-to-mid teens” but said that would quickly decline to something like 7%-8% by the end of the year.
The latest reading of the unemployment rate, for the month of February, is now at 3.5%
A big uncertainty is how small business survives the shutdown in activity, he said.
Kaplan said he wasn’t worried about a surge of inflation down the road from the government programs.
“I think a lot of the forces unfortunately on the other end, as we come out of this, might in fact be deflationary,” Kaplan said.
U.S. equity benchmarks were sharply lower Friday. The S&P 500 index SPX, -2.59% was down 72 points in afternoon trading.
