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The U.S. economy could face 18 months of rolling shutdowns without an effective vaccine for the novel coronavirus, Federal Reserve Bank of Minneapolis President Neel Kashkari said, warning of a “long, hard” road to recovery.
“Barring some health-care miracle, it seems like we’re going to have various phases of rolling flare-ups, different parts of the economy turning on, maybe turning back off again,” Kashkari said Sunday during an interview on CBS’ “Face the Nation. “This could be a long, hard road we have ahead of us until we get either to an effective therapy or a vaccine. It’s hard for me to see a V-shaped recovery under that scenario.”
“I think we should all be focusing on an 18-month strategy for our health care system and our economy,” he added.
Kashkari is a voting member of the rate-setting Federal Open Market Committee this year.
Unemployment has surged in the U.S. over the past few weeks as states and cities have imposed strict stay-at-home mandates and directed nonessential businesses to close in a bid to slow the spread of COVID-19, the respiratory illness caused by the coronavirus.
In the week ending April 4, 6.6 million Americans filed for unemployment benefits, bringing the number of applications for the last three weeks to more than 16 million, a stunning sign of the damage inflicted by the virus. That would bring the jobless rate to at least 10 percent.
The U.S. central bank has responded to the crisis by unleashing its full firepower to support the economy, including slashing interest rates to near-zero, purchasing an unlimited amount of Treasurys (a practice known as quantitative easing) and launching crisis-era lending facilities to ensure that credit flows to households and businesses.
Economists have forecast a sharp contraction in GDP in the second quarter, including Fed Chairman Jerome Powell, who acknowledged that it will be a "very weak" period of growth.
Still, Powell said last week that prior to the pandemic, the economy -- which had been in the midst of a record 11-year expansion -- was healthy and therefore poised for a solid rebound once the virus is contained.
“At the Fed, we are doing all we can to help shepherd the economy through this difficult time,” Powell said Friday. “When the spread of the virus is under control, businesses will reopen, and people will come back to work. There is every reason to believe that the economic rebound, when it comes, can be robust.”