Fed President Warns Of 'Long Hard Road' Ahead, Suggests 18-Month Strategy To Recover From Coronavirus Outbreak

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Federal Reserve Bank of Minneapolis’ President, Neel Kashkari, dismissed the notion of a V-shaped recovery post the COVID-19 pandemic while warning of a prolonged fight against the coronavirus.

What Happened

Appearing on CBS’s “Face the Nation” on Sunday, Kashkari said that pending the development of some new therapy in the next couple of months, it was likely there would be phases of rolling COVID-19 flare-ups.

He warned, “This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine. It's hard for me to see a V-shaped recovery under that scenario.”

Kashkari recognized that the $350 billion assistance given to small businesses is “not going to meet the needs across all the small businesses in America.” He did express optimism that Congress would come together to provide more support to small businesses.

Praising Fed Chair Jerome Powell, Kashkari said, “I think our chairman is being very, very aggressive.” He said the chairman, as well as the Federal Reserve, had learned from their experience of the 2008 financial crisis.

Kashkari emphasized the need to monitor the progression of the virus. He said it was not possible to “shut down the economy for 18 months.” The challenge, according to the Fed CEO, lies in getting the people who are healthy and at lower risk back to work.

Why It Matters

According to Kashkari, it is unlikely that “tens of millions” of people can be tested every day. He advocated being fully invested in vaccines, in addition to current approaches.

The Fed CEO said he was watching very closely for strains on the banking sector due to the COVID-19 crisis, but expressed confidence that the banks were well-capitalized relative to where they were in 2006.

Kashkari’s wants a long-term approach to the COVID-19 crisis. “I think we should all be focusing on an 18 month strategy for our healthcare system and our economy. If it ends up being shorter than that, that's great. We should prepare for the worst-case scenario,” explained Kashkari.

He believes that the virus will flare up again once global economic controls are relaxed as many people are asymptomatic.