Data: Federal Reserve via FRED, projection from Deutsche Bank; Chart: Andrew Witherspoon/Axios

The Fed's outlook is relatively pessimistic about the future, based on recent speeches and communications from top policymakers and likely augurs a massive expansion of the central bank's balance sheet in coming years, Deutsche Bank chief U.S. economist Matthew Luzzetti says in a new research note.

What's happening: "We find that the Fed will need to provide significant accommodation — roughly equal to a fed funds rate of -5% — and that [quantitative easing] and forward guidance could be insufficient."

What it means: Given the Fed's reluctance to introduce negative nominal interest rates and the deteriorating state of the economy, Luzzetti argues the Fed will need to expand its balance sheet by up to an additional $12 trillion in short order.

  • "[T]he more optimistic scenario would take nearly four years to achieve, while the more pessimistic view would take more than eight years."

Watch this space: The analysis relies on "optimistic" assumptions, including "that the Fed’s unconventional tools are as potent today, with yields at record low levels and the market pricing a negative fed funds rate in the coming quarters, as they were several years ago when yields and risk premia were much higher and the market actually anticipated future rate hikes."

  • So, the balance sheet could rise by much more.

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Inflation rising in emerging markets ; Chart: Axios Visuals

As the coronavirus pandemic throttles economies around the globe, central banks are keeping rates low and using quantitative easing policies similar to the Fed's even in some emerging countries.

Why it matters: Policymakers are likely to face a grim choice very soon: whether to continue to support economic growth by keeping rates low and risking a marked increase in inflation, or raise rates to tamp down on inflation and risk exacerbating the coronavirus-driven recession.

Ohio Gov. Mike DeWine tests positive for coronavirus ahead of Trump visit

Photo: Justin Merriman/Getty Images

Ohio Gov. Mike DeWine (R) has tested positive for COVID-19 and plans to quarantine at his home for the next 14 days, his office announced Thursday. He currently has no symptoms.

Why it matters: The 73-year-old DeWine was set to meet President Trump Thursday on the tarmac at an airport in Cleveland and was tested as part of standard protocol. He is the second governor known to have contracted the coronavirus, after Oklahoma Gov. Kevin Stitt (R).

Updated 19 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Eniola Odetunde/Axios

  1. Global: Total confirmed cases as of 12:30 p.m. ET: 18,860,908 — Total deaths: 708,676— Total recoveries — 11,394,821Map.
  2. U.S.: Total confirmed cases as of 12:30 p.m. ET: 4,834,546 — Total deaths: 158,445 — Total recoveries: 1,577,851 — Total tests: 58,920,975Map.
  3. Politics: Pelosi rips GOP: "Perhaps you mistook them for somebody who gives a damn" — Ohio Gov. Mike DeWine tests positive.
  4. Public health: Fauci says task force will examine aerosolized spread.
  5. Business: July's jobs report could be an inflection point for the recovery — Teladoc and Livongo merge into virtual care giant.
  6. Sports: Where college football's biggest conferences stand on playing.