The Economy’s Outlook, Challenges, and Way Forward

Recent economic data have been encouraging, but President Rosengren believes the most difficult part of the recovery is still ahead of us. A full recovery probably requires the availability of vaccines and more effective treatments for the virus because until then, many businesses and households are unlikely to return to more normal spending habits. While he anticipates a slowly improving economy, economic activity still faces serious headwinds. Potential financial impediments and challenges in the labor market make the recovery process more gradual than any of us would prefer. Improvement in the economy will depend importantly on the progress we make in mitigating and treating the virus. Until a vaccine is widely available, it is appropriate to have highly accommodative monetary and fiscal policy. Monetary policy is pursuing new and imaginative ways to deal with the effects of this pandemic. However, President Rosengren's view is that additional fiscal policy is probably the more effective tool at this time, since it can directly allocate money to firms and businesses most impacted by COVID-19 without requiring them to take on additional debt that must be repaid.