Aug 3, 2020 - Economy

Top Fed official: Short, sharp coronavirus lockdown will enable recovery

Minneapolis Federal Reserve Bank President Neel Kashkari visits "Maria Bartiromo's Wall Street" at Fox Business Network Studios on October 11, 2019 in New York City.

Minneapolis Federal Reserve Bank president Neel Kashkari in New York City last October. Photo: Roy Rochlin/Getty Images

A top Federal Reserve official told CBS Sunday that a "really hard" four- to six-week lockdown could benefit the U.S. economy as Congress "has the resources to support those who are most hurting" during the coronavirus pandemic.

Details: Minneapolis Federal Reserve Bank president Neel Kashkari said a short lockdown "could get the case count down so that our testing and our contact tracing was actually enough to control it the way that it's happening in the Northeast right now."

  • If that doesn't happen, "we just have this raging virus spreading throughout the country with flare-ups and local lockdowns for the next year or two," Kashkari said.
  • He predicted that "many, many more" small and big businesses would file for bankruptcy, leading to a "much slower recovery for all of us," with businesses taking longer to rebuild and then to bring workers back in.

Why it matters: As the country continues to grapple with the outbreak, the U.S. economy shrank at an annualized 32.9% rate in the second quarter — the worst-ever contraction on records that date back to 1947, Axios' Courtenay Brown notes.

Of note: Kashkari said the U.S. personal savings rate had "taken off." "Before the crisis, it was around 8%," he added. "Now it's around 20%."

  • Americans who are still working and saving more enables more resources for Congress to support those who've been laid off, Kashkari explained.
  • "Right now the U.S. can fund itself at very, very low rates. Congress should use this opportunity to support the American people and the American economy," he added.

The big picture: Coronavirus cases began declining or holding steady in most states by the end of last month. However, two of the worst U.S. hot spots, California and Florida, have shown little improvement after weeks of deterioration.

  • White House coronavirus task force coordinator Deborah Birx noted Sunday the U.S. has shifted into a new phase of the pandemic, after infections spread further into rural areas.

What they're saying: Treasury Secretary Steven Mnuchin told ABC's "This Week" Sunday, "There's obviously a need to support workers and support the economy. ... On the other hand, we have to be careful about not piling on enormous amount of debts for future generation."

  • Per CNBC, President Trump said last week, "I really do believe a lot of the governors should be opening up states that are not opening."

By the numbers: More than 154,800 people have died of COVID-19 and almost 4.7 million people have tested positive for the virus in the U.S., per Johns Hopkins.

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