(Reuters) – Chicago Federal Reserve Bank President Charles Evans on Monday called forcefully for more U.S. government spending to support the economy, saying it is up to lawmakers and the White House to put the job market back on track toward health.
“Aggregate demand trouble is brewing with the expiration of these relief policies,” including supplemental jobless benefits and a national moratorium on evictions that ended last month, Evans told reporters on a call. “The punch line ought to be, ‘the ball is in Congress’ court.’ Fiscal policy is really fundamental for getting us going forward.”
In making that point Evans joined several other Fed policymakers on Monday, even as congressional Democrats and Trump administration officials made little progress on crafting a coronavirus relief bill to follow a $2.3 trillion package passed in March. [L1N2F5153]
“If we go very long without somehow addressing the reduction and evaporation of that support, I think it’s going to show up in lower aggregate demand, and that would be very costly for the economy, individuals, households, people,” Evans said.
Under his baseline forecast, the U.S. unemployment rate – now at 11% – will fall to 9.5% by year’s end and to 6.5% by the end of 2021, well above where it ought to be in a healthy economy, he said. Worse trajectories are “equally” as likely, he said.
Evans said easing monetary policy further would really only be effective once the path of the virus is clearer and the economy looks further on the way to full employment, perhaps by the spring of 2021.
“Monetary policy is about where it can be,” he said. “At the moment, it’s really fiscal policy that needs to be addressing this.”
(Reporting by Ann Saphir in Berkeley, Calif.; Editing by Matthew Lewis)