The U.S. economy is facing a huge shock to the system over the near term then will bounce back strong after, St. Louis Federal Reserve President James Bullard said Wednesday.
Bullard spoke to CNBC in an interview on “Squawk Box.”
The central bank official was in the news earlier this week when he forecast that the unemployment rate will skyrocket to 30%, higher than it was even during the Great Depression.
However, he tempered those remarks in his CNBC interview, saying that while the near-term damage will be daunting, it’s largely an intentional hit due to efforts to combat the coronavirus and will be unwound quickly.
“This number will be unparalleled, but don’t get discouraged,” Bullard said. “This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine.”
On the stimulus package currently making its way through Congress, Bullard said the $2 trillion or so figure is about right considering the impact the move to shut down much of American commerce will have on production. State governments increasingly are ordering residents to stay inside as the virus runs its course, a move that hits at the heart of the consumer-driven U.S. economy.
Bullard and his colleagues have taken extraordinary steps during the crisis, pulling short-term borrowing rates to near-zero and implementing a slew of programs aimed at keeping markets functional and directing funding to businesses and institutions in need.
He said the unemployment rate indeed will spike but then should settle back to its trend, which had been around a 50-year low.
“You’d have this huge spike mostly centered in the second quarter, but everyone knows exactly what that is, that’s pandemic relief that’s done on purpose,” he said. “If we can get this to work right, everything will snap back to normal once this is over.”