Fed’s Rosengren says economy is more fragile than data suggests

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Boston Fed Chairman Eric Rosengren said on Wednesday he was less optimistic about the economic outlook than many of his colleagues, despite encouraging economic data this summer.

The Fed’s median forecast is quite optimistic, forecasting a drop in the unemployment rate to 7.6% by the end of the year and 5.5% by the end of 2021, with a gradual return of inflation to the 2% target.

“I think the economy remains fragile,” Rosengren said, in a speech at the Boston Economic Club.The Boston Fed chairman said his forecast for a slower recovery depended on “several challenges” the economy could face in the coming months.

“I’m concerned that a second wave of COVID-19 infections this fall and winter is likely, which could lead some states to impose further restrictions on mobility and face-to-face interactions,” Rosengren said.

He said he was also concerned that more congressional spending to support the economy “seems unlikely to materialize anytime soon.”

Rosengren added that he expects the financial fallout from companies affected by the virus “will become a bigger headwind in the future.”

“I certainly hope that this less optimistic outlook turns out to be wrong,” said the Boston Fed chairman.

He said further fiscal stimulus and continued monetary stimulus were still needed.

Stocks were lower on Wednesday, with the Dow Jones Industrial Average DJIA,
-1,92%
down 120 points.

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