Fed’s Mester says recovery will be ‘a slow one’ and more economic support is needed

The Federal Reserve will have to keep supporting the economy as the recovery from the coronavirus pandemic “is going to be a slow one,” a top official at the central bank said Friday.

“There’s more pain out there that we’re going to have to support the economy through,” Loretta Mester, president of the Cleveland Fed, told CNBC’s Steve Liesman during a “Squawk Box” interview. “What that looks like, we’re going to have to take our time to evaluate that, but I think accommodative monetary policy is going to be very important throughout this recovery.”

Earlier this year, the Fed slashed rates to near zero as the coronavirus outbreak forced the U.S. economy to shut down. The central bank also launched an open-ended asset-purchasing program, along with other measures, to support the economy during this period. On Thursday, Fed Chairman Jerome Powell laid out an inflation policy framework that would keep rates lower for longer.

Mester pointed out that high-frequency data examined by the Fed shows economic activity has slowed down a bit since the country started to reopen.

“That’s what you’d expect. It’s going to be fits and starts here,” Mester said. “It’s definitely true that, when the economy started to reopen, you saw better data on hiring and you saw activity increase. But I think the virus is sort of driving things.”

Coronavirus cases in the U.S. have ballooned to more than 5.8 million, according to data from Johns Hopkins University. However, the number of new daily infections has tempered recently, remaining below 50,000 since mid-August.

“At least in our district, we have seen a tempering in hiring, and firms are reevaluating the number of new hires they want to bring back on board because they don’t know what the outcome is going to be,” Mester said.  

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